The State Bank of Pakistan (SBP) announced on Thursday that the country has achieved a current account surplus of $1.16 billion during the first four months (July – October) of the fiscal year 2020/2021. This marks a significant turnaround from the same period last year, when Pakistan recorded a current account deficit of $1.42 billion.
Analysts at Arif Habib Limited highlighted that this is the fourth consecutive month that Pakistan has posted a current account surplus. In October 2020 alone, the current account balance (CAB) registered a surplus of $382 million, compared to a surplus of $73 million in October 2019. This represents a significant month-on-month increase, with October 2020’s surplus showing a remarkable 6.47-fold jump from the previous month’s surplus of $59 million.
The primary factors contributing to the current account surplus in October 2020 were a notable increase in remittances and a decline in imports. Remittances rose by 14.1% year-on-year (YoY), translating to an increase of $283 million. This surge in remittances reflects the continued confidence of overseas Pakistanis in the country’s economic management and their efforts to support their families amid global uncertainties.
In addition, the total imports of goods and services declined by 5.4% YoY during the same period. The reduction in imports, driven by a combination of lower domestic demand and a focus on import substitution, helped ease pressure on the current account.
However, the overall export performance during this period was less encouraging. Total exports of goods and services declined by 13% YoY, amounting to a decrease of $356 million. This drop in exports reflects ongoing challenges in global trade, particularly for emerging markets like Pakistan that are still navigating the economic repercussions of the COVID-19 pandemic.
Despite the decline in exports, the current account surplus achieved in the current account is a positive development for Pakistan’s economy. For the first four months of the current fiscal year, the country recorded a surplus of $1.16 billion, a stark contrast to the deficit of $1.42 billion in the same period of the previous fiscal year.
The balance of trade (BoT) in goods and services also showed some improvement. Although the BoT remained negative, it was down by 3% to $7,533 million during July – October 2020/2021, compared to a deficit of $7,759 million in the same period last year.
These positive trends in the balance of payments, driven by a current account surplus in the current account and a reduction in the trade deficit, indicate that Pakistan is moving towards greater economic stability. However, sustaining these gains will require continued focus on boosting exports, managing imports effectively, and maintaining robust inflows of remittances.
