KARACHI: The country’s current account posted a surplus of $792 million during Jul-Sep of this fiscal year (FY21), which is the first quarterly surplus in more than five years.
Economists said that the country’s external account performed well due to strong growth in home remittances inflows. “Major reason for the current account surplus is lower deficit on services and 31 percent increase in workers remittances in the first quarter,” they added.
The State Bank of Pakistan (SBP) reported on Wednesday that current account recorded a surplus of $792 million during the first quarter (July-Sep) of FY21 compared to $1.492 billion deficit in the same period of last fiscal year (FY20). This is the first quarterly surplus in more than 5 years, the SBP said.
According to the SBP, continued buoyancy in remittances and a broad-based rebound in exports (up 29 percent month on month) also drove the current account surplus in September 2020. Imports also picked up in line with the ongoing revival in domestic economic activity, it added.
In September, the current account posted a surplus for a third successive month. Current account surplus was $73 million in September 2020 as against a deficit of $278 million is September 2019. However, the surplus in September is lower than August 2020, in which the current account recorded a surplus of $211 million.
This was the third consecutive month that Pakistan’s current account has recorded a surplus, taking overall current account surplus to $792 million in the first quarter of this fiscal year compared to a deficit of $286 million deficit in the previous quarter (April-June of FY20).
Economists said that the country’s external account performed well due to strong growth in home remittances inflows. “Major reason for the current account surplus is lower deficit on services and 31 percent increase in worker remittances in the first quarter” they added.
Looking forward, economists are expecting that the current account deficit may be in the range of $2.5 to $3 billion at the end of FY21 as COVID-19 related lockdowns and restrictions ease globally and international oil prices also trend up.
Muzzammil Aslam CEO Tangent Capital Advisors said that the first quarterly surplus in more than five years will help to stop the decline in the country’s foreign exchange reserves.
He said that going forward it is being expected that exports to surprise and balance of payment to remain at manageable level. However recent shortage of food items and import of essential commodities is the risk to the lower imports. Samiullah Tariq an economist said that Pakistan is receiving higher remittances inflows for the last few months due to restricted physical mobility of passengers on the back of Covid-19 restrictions. In addition, the inflows through legal channels are also increasing due to governments crack down on illegal channels of transferring money, incentivising inflow of remittances through formal channels and efforts towards eliminating money laundering, he mentioned.
For the month of September 2020, remittances also surged by 31 percent, thereby covering the trade deficit and turning the current account into surplus, he added.
According to SBP, the collective deficit of goods trade, services, and income stood at $7.317 billion in the first three months of this fiscal year as against $ 7.570 billion in the same period of last fiscal year.
With growth in imports and decline in exports, the country's overall goods trade deficit surged to $5.252 billion in July-Sep of FY21 as against $ 5.05 billion in corresponding period of last fiscal year.
Similarly, services trade deficit declined by 51 percent to $539 million with $1.255 billion exports and $1.764 billion imports in the first quarter of this fiscal year.
Copyright Business Recorder, 2020
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