KARACHI: The current account showed a surplus of $164 million in February compared with a deficit of $427m in January, the State Bank reported on Tuesday.

This shows a positive improvement for the country facing serious challenges of foreign exchange reserves and exchange rate.

The current account deficit of the eight months (July-Feb) was over $2 billion despite this surplus in February. Though the deficit is not large, it is critical for an economy like Pakistan which has poor reserves of less than $10bn including $4.6bn of the central bank.

The current account during the same period of last year was much better with minus $831m. Details show that the real difference appeared on services side as the balance of trade in services jumped to a deficit of $1.731bn compared to just a deficit of $527m during the same period of last year.

Analysts said that despite higher inflows through multilateral and bilateral sources and increased remittances, the deficit of over $2bn must be a difficult situation for the government. The trade deficit also surged during this period by $467m to $10.837bn.

Despite poor reserves and large deficit, the exchange rate showed marvellous improvement as the local currency appreciated by 8 per cent during the past three months. However, sentiment in the currency market was not bullish over fears that persistent large current account deficit could derail the achievement regarding the exchange rate.

The dollar demand remained high in the open market despite supply by the SBP, while the greenback’s rates under surveillance of the bank could not cross Rs100 on Tuesday.

Exporters have already warned that the sudden drop in the dollar’s value could hurt the export as their profits have reduced. They demand incentives as compensation for the devaluation of dollar.

“I don’t believe that the recent export incentives provided by the European Union could bring any positive change during this fiscal. The trade deficit will remain high,” said a textile-based manufacture and exporter.