Pakistan records current account surplus for fourth consecutive month

The country’s current account witnessed a surplus for the fourth consecutive month in October, rising to $382 million or 1.6 per cent of the gross domestic product (GDP), data released by the State Bank of Pakistan (SBP) showed on Thursday.

Compared to the same month last year, the surplus witnessed an increase of 423pc from $73m, while on a month-on-month basis it was up 547pc versus the $59m recorded in September.

“The surplus came on the back of a sustained increase in remittances and a smaller trade deficit,” the central bank said.

Since the start of this fiscal year in July, the cumulative current account surplus has reached $1.2 billion, reversing the $1.4bn deficit recorded in the same period last year, the SBP added.

“The current account recorded a fourth consecutive monthly surplus in October […] an improvement was witnessed on account of better trade deficit as imports declined by 9pc month-on-month compared to exports increasing one per cent month-on-month,” said Syed Atif Zafar, chief economist at Topline Securities.

“Remittances also remained healthy at $2.28bn,” he added.

On a monthly basis, the trade deficit in October narrowed by 20pc to $1.49bn from $1.86bn in September. Remittances during the month clocked in at $2.284bn, unchanged from the previous month.

The country’s current account has been helped by a significant increase in remittances during the current fiscal year.

So far, in the four-month period from July to October, total inflows of remittances have risen to $9.43bn — up 26.5pc — compared to $7.45bn in the same period last year.

On the other hand, during the same July-October period, the country’s trade balance in goods has risen four per cent to $6.74bn from $6.48bn during the same period last year; the services trade balance narrowed 38pc to $785m compared to $1.27bn.

Reacting to this development, Minister for Industries and Production Hammad Azhar said “Pakistan’s economy continues to improve”.

“The trade deficit continues to shrink and industrial production is showing strong growth,” he said.

Federal Minister for Planning and Development Asad Umar said: “This is the fourth month of current account surplus. We inherited the biggest current account deficit in history with monthly current account deficits of $2bn when the government was formed!”

Reserves cross $20bn mark

In a separate press release, the SBP said the country’s total foreign exchange reserves crossed the $20bn mark during the week that ended on Nov 13.

“The SBP reserves have increased to $12.93bn as of Nov 13, 2020, which is the highest level since February 2, 2018. Total liquid foreign reserves held by the country rose to $20.08bn,” a press release said.

During the week under review, the SBP’s reserves increased by $190.7 million whereas those of the commercial banks declined by $12m.

Experts said reserves increased due to inflows from lenders like the International Monetary Fund, World Bank, Asian Development Bank etc.; a low trade deficit; high remittances coupled with less outflows in the form of education and travel expenses due to the pandemic.