As expected, the current account is nearly balanced in the first quarter of the fiscal year. The story is straightforward—both imports and exports are rising, although imports are increasing at a faster pace—indicating a modest economic recovery. However, the economy, constrained by the balance of payments, can only sustain this limited momentum due to robust growth in remittances. That said, inward remittances may have reached their short-term peak, potentially limiting further economic growth.

The current account posted a surplus of $119 million in September 2024, while 1QFY25 recorded a marginal deficit of $98 million, down 92 percent from the $1.2 billion deficit in the same period last year. The trade deficit in goods worsened by 26 percent, reaching $7.4 billion in 1QFY25.

Goods imports rose by 16 percent to $14.2 billion between July and September 2024, with imports totaling $4.7 billion in September—showing almost no change on a monthly basis. According to detailed PBS data, excluding the food group, nearly all other subgroups recorded double-digit growth in imports during the first quarter. The largest increase occurred in the machinery group, which rose by 22 percent to $2.0 billion. Within this category, mobile phone imports declined by 20 percent, implying that demand for real machinery imports is increasing.

Transport group imports increased by 20 percent to $487 million, reflecting a slight uptick in auto demand due to falling interest rates, as car loans posted positive monthly growth for the first time in many months. Another notable increase was in petroleum imports, up 16 percent in 1QFY25 to $4.0 billion—mainly driven by high crude oil imports, while imports of petroleum products remained controlled due to smuggling from Iran.

Exports of goods rose by 15 percent in July-September 2024 to $7.9 billion, based on PBS data. In contrast to imports, the food group was the best performer, up 26 percent to $1.6 billion. Rice exports, in particular, surged by 77 percent to $721 million, with volumes up 66 percent. However, this rice boom is expected to end soon.

Textile exports also performed well, increasing by 10 percent to $4.5 billion. Growth was driven by value-added sub-sectors such as knitwear, which rose by 14 percent to $1.3 billion; bedwear, up 13 percent to $795 million; and readymade garments, which jumped by 23 percent to $997 million. In contrast, cotton yarn exports declined by 48 percent.

Service exports marginally increased by 6 percent to $1.9 billion in 1QFY25, with technology exports being the standout performer, rising 34 percent to $876 million. The monthly total in September stood at $292 million, maintaining a near $300 million monthly run rate.

On the other hand, service imports declined by 3 percent to $2.6 billion in 1QFY25, improving the trade deficit in services by 22 percent to $699 million. However, the overall deficit in goods and services trade worsened by 19 percent to $7.4 billion. Including the primary account, the total trade and primary account deficit grew by 19 percent, or $1.5 billion, to $9.4 billion.

Thanks to the remarkable growth in remittances, which increased by 39 percent, or $2.5 billion, to $8.8 billion in 1QFY25, the current account is nearly balanced. Remittances in September amounted to $2.9 billion, maintaining a monthly run rate of around $3 billion.

Thus, the growth in remittances and technology exports are the highlights, allowing the country to sustain modest growth. The country must continue to enhance these two sectors, as growth in goods exports is likely to remain a challenge due to competitiveness issues. These areas will be essential in supporting whatever growth the country can achieve.