The current account posted a surplus of $349 million in October, and the 4MFY25 surplus stands at $218 million. Demand has picked up slightly, while the growth in exports and remittances remains relatively robust, keeping the current account in surplus.
In the absence of private international credit and investment flows, import growth must be supported by an uptick in exports and remittances. Consequently, economic growth remains below 3 percent, barely matching population growth.
Imports have been hovering between $4.5–5 billion in recent months. The reversal in global commodity prices is keeping the dollar value in check. Nonetheless, quantities in many sectors remain far from their peak, as evident in the continued negative growth in Large Scale Manufacturing.
Goods imports stood at $4.6 billion in October 2024, while the Jul–Oct total is at $18.8 billion—up by 13 percent. Food imports are falling; in 4MFY25, they declined by 5 percent to $2.2 billion, with import volumes shrinking for tea, pulses, and other smaller items. People are cutting back on non-essential consumption.
Machinery imports are picking up. Growth in SBP numbers—based on payments—is higher at 42 percent compared to 15 percent in PBS. This suggests that some pending payments are being cleared as well. With improved flows, SBP is allowing contract payments to move swiftly. Higher growth is observed in power generation, construction, and textiles. On the other hand, mobile phone imports are down by 11 percent, indicating continued weak consumer demand.
Car and other transport imports are showing decent growth, up by 24 percent in 4MFY25 to $617 million, though still a quarter short of their peak in FY22. Petroleum imports increased by 2 percent to $5.1 billion. This rise is mainly driven by crude imports, which are up by 17 percent. The volume increased by 31 percent, as lower prices kept value growth in check. However, product imports declined by 7 percent in volume and 22 percent in value. RLNG imports are up by 11 percent to $1.3 billion, largely due to long-term contracts with Qatar. Limited pipeline capacity is forcing domestic gas production to be curtailed, which in turn reduces crude production and necessitates higher crude imports.
Goods exports reached an all-time high for the first four months of any fiscal year, standing at $10.5 billion—up by 9 percent YoY. Food exports rose by 14 percent, with rice exports up by 34 percent to $902 million. However, the boost from carryover stocks will soon end, as the new crop is not shaping well.
Textile exports increased by 5 percent to $5.8 billion, with growth in value-added products, while yarn and cloth exports continue to decline. Orders are steady, and export figures are solid, but textile players remain dissatisfied due to higher taxation and delays in refunds. Many low-value-added businesses are shutting down, replaced by imported raw materials, reflected in a 35 percent growth in textile imports to $1.6 billion.
The goods trade deficit worsened by 19 percent to $8.0 billion.
Service exports continue to grow, up by 8 percent to $2.6 billion in 4MFY25. IT exports rose by 35 percent to $1.2 billion. Growth in service imports was subdued at 2 percent, reaching $3.5 billion, reducing the trade services deficit by 10 percent to $1.0 billion.
The overall deficit in the trade of goods and services worsened by 15 percent to $9.3 billion. The primary income deficit increased by 9 percent to $2.9 billion.
The standout performer is worker remittances, which grew by 35 percent to $12.4 billion, driven by increased overseas migration, freelance income growth, and tighter controls on money laundering.
However, remittances alone are insufficient to enable imports to grow enough to push GDP growth beyond 3 percent. This requires growth in financial and capital account flows within the balance of payments. FDI remains low, and investor sentiment is negative. Private credit flows have dried up. These areas need improvement to achieve sustainable economic growth.
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