KARACHI: Pakistan’s current account again recorded a surplus in August at $297 million, as against a deficit of $601m in the corresponding period of previous year, reported the State Bank on Wednesday.
However, the current account surplus plunged by 71 per cent compared to $508m in July, which was revised upwards from $424m announced earlier.
For July-August cumulatively, the current account surplus came in at $805m, as against a deficit of $1.214bn in similar period of FY20.
With the second consecutive current account surplus in the new fiscal year, the country looks to have improved its external front which was faced a deficit of $20bn in FY18.
The major factor that helped reverse the current account deficit into surplus was a sharp decline in imports, even as the exports fell.
Sharp fall in imports and exports led to reversal of current account deficit
So far all the major indicators for the country’s external account are positive except exports. Despite support and incentives from the government and subsidised liquidity supplied by the SBP, exports could not show much improvement.
Exporters generally take shelter behind the recessionary impact of Covid-19 in the international markets which hit the consumption levels the world over and slowed down growth of developed countries.
SBP Governor Dr Reza Baqir said on Monday that risks included a potential second wave of Covid-19 domestic infections, a possible sharp increase in cases during winters in Pakistan’s major markets in Europe and the US. Both the exports and imports fell by 19pc in August.
The country also succeeded to receive higher remittances which jumped by 31pc to $4.86bn in the first two months of FY21, compared to the same period of last fiscal year.
Baqir during the press briefing on Monday rejected the perception that inflows increased due to layoffs of overseas Pakistanis. He said it was particularly due to higher support given by the overseas residents to their relatives affected by Covid-19. “The country’s remittances rose to a record monthly high in July and have topped $2bn for the last three months,” he said.
“Efforts to attract workers’ remittances, flexible exchange rate and relatively benign import prices explain the improving current account balance,” said the SBP in a tweet.
The Foreign Direct Investment (FDI) also helped the country reduce external expenses and build exchange reserves which stand at about $12.5bn, enough for three months of imports.
In the first two months of FY21, the FDI showed a positive trend as it surged by 40pc year-on-year to $226.7m, as against $162m in the same period of last fiscal year.
Published in Dawn, September 24th, 2020