‘Heading in the right direction’: Pakistan sees record 1Q current account surplus

21 Oct 2020

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Prime Minister Imran Khan on Wednesday said the country was "headed in the right direction finally" as the country’s current account witnessed a record surplus of $792 million in the first quarter of the current fiscal year. — APP/File
Prime Minister Imran Khan on Wednesday said the country was "headed in the right direction finally" as the country’s current account witnessed a record surplus of $792 million in the first quarter of the current fiscal year. — APP/File

Prime Minister Imran Khan on Wednesday said Pakistan was “headed in the right direction finally” as the country’s current account witnessed a record surplus of $792 million in the first quarter of the current fiscal year, data released by the State Bank of Pakistan (SBP) showed.

The surplus came on the back of an upward trend in remittances and month-on-month increase in exports during September, according to the central bank.

Current account surplus in the month of September clocked in at $73m, down 65.4pc from $211m in August, mainly on account of the widening trade deficit during the month under review.

“Great news for Pakistan. We are headed in [the] right direction finally. Current Account was in surplus of $73m during September, bringing [the] surplus for 1st qtr to $792 mn compared to [a] deficit of $1,492 mn during [the] same time last year. Exports grew 29pc and remittances grew 9pc over previous month,” said Prime Minister Imran Khan on Twitter.

The SBP said in September, the current account posted a surplus for a third consecutive month in a row.

“The surplus reached $73m [in September] against a deficit of $278m a year earlier. As a result, the current account recorded a surplus of $792m in 1QFY21, the first quarterly surplus in more than five years. Continued buoyancy in remittances (up 9pc m/m) and a broad-based rebound in exports (up 29pc m/m) drove the current account surplus in September. Imports also picked up in line with the on-going revival in domestic economic activity,” it added.

The month-on-month decrease in the current account surplus came as a result of an 8pc increase in the trade deficit in September, the central bank said. Pakistan's trade deficit in September rose to $1.82 billion compared to $1.727bn in August on account of 62pc and 21pc jump in food and machinery imports, respectively.

In September, balance of trade in goods deteriorated by $140m, up 8pc month on month on the back of increase in imports of goods by $581m or 18pc month-on-month, whereas exports of goods improved by $441m — up 29pc from August, said Chief Economist at Topline Securities Syed Atif Zafar while speaking to Dawn.

He said that the balance on primary income also deteriorated by $197m or 61pc over the previous month, however, an increase in remittances by $189mn or 9pc helped cushion its impact.

“Looking forward, we expect the current account deficit to clock in at $2.5-3bn in FY21 (1.0-1.2pc of the GDP) as Covid-19 related lockdowns and restrictions ease globally and international oil prices also trend up,” he added further.