Pakistan reports massive current account surplus of $654mn in March

Pakistan’s current account posted a massive surplus of $654 million in March 2023 against a (revised) deficit of $36 million in February 2023, reported the State Bank of Pakistan (SBP) on Wednesday.

“Cumulatively, the current account deficit reduced to $3.4 billion in July-March FY23 against a deficit of $13 billion in July-March FY22,” the SBP said in a statement.

This is the first surplus on a monthly basis since November 2020 when the pandemic had brought the global economy to a standstill.

The surplus for March is also in stark comparison to the (revised) deficit for the same month of the previous year when it stood at nearly a billion dollars.

“On a YoY basis, the primary reason behind the surplus was a 36% decline in total imports. However, total exports and remittances also decreased by 20% and 11%, respectively,” said brokerage house Arif Habib in a note.

Pak-Kuwait Investment Company’s Head of Research Samiullah Tariq told Business Recorder that the major reason behind the surplus was a sharp decline in imports.

“Some of the drop was witnessed due to the import restrictions placed by the government while the remaining came due to natural causes,” he said. “On the flipside, remittances and exports fell on a yearly basis.”

Ismail Iqbal Securities Head of Research Fahad Rauf told Business Recorder that the surplus was well in line with market expectations.

“We were expecting it because remittances rose by $500 million in March on year-on-year basis while trade remained restricted,” he said. “The issues with opening letters of credit (LCs) persists and this has capped imports.”

Moreover, there are also restrictions on making foreign payments and companies are unable to repatriate their profits as well which resulted in the surplus, he added.

“In the long run, the surplus is unsustainable because if Pakistan opens its economy, imports will rise and the deficit will return,” he said. “We are an import-oriented nation.”

“To maintain the surplus, we will have to keep the economy choked,” he said.

The current account balance is a key figure for Pakistan’s economy that is battling low level of foreign exchange reserves at the moment. Islamabad is currently engaged in talks with the International Monetary Fund (IMF) for revival of its stalled bailout programme, and moving to secure additional funding to convince the lender that its balance of payments’ position is fully financed.

In this backdrop, a current account surplus is being seen as a positive development.

Finance Minister Ishaq Dar took to Twitter to share the latest figure.

Import and export figures

Export of goods during March 2023 stood at $2.43 billion, while export of services stood at $615 million. Import of goods stood at $3.99 billion, while services amounted to $647 million.

Similarly, for the nine-month period of the ongoing fiscal year, export of goods stood at $21.1 billion, while export of services amount to $5.53 billion. Import of goods were clocked in at $41.5 billion, while services amounted to $5.76 billion, showed SBP data.