The current account surplus streak continues for the fourth consecutive month in November, and the surplus in November alone stood at $729 million which is the highest surplus since March 2015. The 5MFY25 surplus stood at $944 million, which is the highest since 5MFY21. Low imports amid decent exports and robust home remittances are shaping the current account well. However, the surplus is likely to be less in December, due to curbs in smuggling; lately, the imports of petroleum products are higher.
The imports of goods stood at $4.1 billion which is down by 10 percent as compared to the previous month while in 5MFY25 the toll stood at $22.9 billion – up by 8 percent. The detailed numbers are awaited, but based on 4m data, the imports across the board are slightly picking up as compared to last year as there are no import restrictions while the lower commodity prices are keeping the value growth in check.
Food imports in 4MFY25 were up by 13 percent YoY while it’s still at a discount to the peak year of FY22. The biggest jump is in machinery imports – up by 42 percent in 4MFY25, as the restriction was the most in this area and now the numbers are being normalized. The growth in the transport sector is still tapered, up by 10 percent YoY. However, the car sales growth is at 50 percent in 5MfY25 – suggesting that car assemblers are getting rid of inventory which is evident by the discounts being offered by various players. Going forward, if car sales continue to rise, the impact will be visible in import numbers.
The petroleum imports growth is standing at 8 percent in 4MFY25, which is in line with 5 percent growth in the oil and marketing industry volumes. There is an uptick in numbers in November and December due to seasonal agriculture factors and a curb in smuggling, and sooner these higher imports to reflect in payments and would result in a pick in import value.
A bigger growth is in textile imports – up by 35 percent in 4MFY25 which is in line with the pick in high value-added exports amid poor cotton production and the reluctance of exports to buy yarn and cloth from the domestic market owing to delays in refunds. They rely more on imports and that is making textile imports grow with exports.
Exports of goods in 5MFY25 went up by 7 percent to $13.3 billion and in November there was a decline (MoM) by 8 percent to $2.8 billion. This is the highest number in history. The outlier is rice which is up by 34 percent in 4MFY25. However, the bonanza is soon going to be over, as the high rice exports are due to carry forward of stocks, and the new crop is not that encouraging amid the exports from competitor India is open.
Textile exports are at a time high based on 4MFY25 data – up by 5 percent YoY. The growth is mainly in high-value-added products while low-value-added products like yarn and cloth exports are on the decline. The better growth is due to the spillover of orders from Bangladesh where its own economic and political issues are swaying the customers away and some of the orders are falling in Pakistan.
The trade deficit of goods stood at $9.7 billion – up by 10 percent. The trade deficit of services is improved by 9 percent to $1.1 billion as services exports are the shining star –IT exports are up by 33 percent to $1.5 billion in 5MFY25.
The bigger stairs home remittances, which are up by 34 percent in 5MFY25 to $14.8 billion. Thanks to more people going abroad, curbs in Hundi and Hawala, and chunky growth in freelancer income which is mainly falling in this head.
The overall current account has been shaped very comfortably in 5MFY25. However, the surplus is likely to be lower in the coming months, as the demand is pickling up slightly, and the impact of the 900 bps decline in interest rates in the last six months would start translating into better demand going forward. Sooner or later, the currency must adjust a bit to counter that, as the REER at 102 suggests that a marginal depreciation at this point could be healthy.
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