ISLAMABAD: Pakistan’s external accounts position has continued to improve, but prospects for the balance of payments in 2009-10 hinge significantly on the magnitude and timing of external inflows, as well as on the outlook for international oil and commodity prices, says Pakistan Economic Update released by the ministry of finance on Thursday.

The external current account balance swung to a surplus in September to $174 million after posting a nominal deficit in August of $19 million.

Lower imports and record-breaking inflows of worker remittances have contributed most to the turnaround, according to the Update covering the first quarter of fiscal year 2009-10.

The report says remittances have continued to surge in the first quarter of 2009-10, crossing $800 million for the first time in September, after recording an annual increase of 25 per cent in 2008-09.The ministry of finance says that Pakistan’s economy is tentatively in a recovery phase after a deep and broad slowdown.

If this trend is confirmed in the months ahead, with the economy still having to navigate through significant potential challenges and headwinds, the slowdown, for all its intensity, would have lasted for a lesser duration than initially feared. Despite the fact that the economy appears to be recovering, however, moving to a sustained expansion is conceivably some way off.

While an improvement in global economic conditions will be helpful in fostering the turnaround in the domestic economy, the biggest contribution would be made by the continuation of a deep and sustained commitment to wide-ranging structural reform, it says.

The ministry of finance estimated that the real GDP growth for 2009-10 will be between two and three per cent based on the current trends.

The Pakistan Economic Update has been published ahead of the third review of the country’s economic performance by the International Monetary Fund (IMF) under the Stand-By Arrangement (SBA) which is taking place in Dubai from November 2. Dubai is also the venue of the technical level meeting to hammer out the draft legal document of Value-Added Tax (VAT) to be enforced by the government, replacing GST from July 1, 2010.

The Economic Update says there has been a nominal increase of 0.2 per cent in the overall tax collection during the July-September 2009 quarter.

Due to a sharp fall in sales and corporate profitability in prior periods, there has been a 19 per cent decline in the value of dutiable imports during July-September 2009 period impacted by internal restructuring of FBR, the fallout of the internal security situation on business and a change in the dates for filing advance tax.

However, the update says, tax collection for the first quarter should be viewed in the context of a 35 per cent increase in tax collection during July-September 2008 against the corresponding period of 2007, providing an unusually high base for comparison.