• SBP data shows CA was surplus with $382m in October against $59m in September
• Hafeez says govt will continue efforts for export-oriented domestic productivity-driven sustainable growth
KARACHI: Pakistan succeeded in keeping its current account surplus in October, the fourth consecutive surplus since July, the State Bank reported on Thursday.
The latest SBP data showed that the current account in October was surplus with $382 million against $59m in September — an increase of 547 per cent.
However, the cumulative surplus during July-October FY21 was $1.16 billion against a deficit of $1.419bn during the same period last year.
Government’s economic managers were upbeat over the development.
Adviser to the Prime Minister on Finance Hafeez Shaikh tweeted: “PTI Govt inherited a Current Account Deficit of $19.2bn, we reduced it to $3bn in last fiscal year & now a surplus of $1.2bn this year with fourth consecutive monthly surplus. Govt will continue its efforts for an export-oriented domestic productivity-driven sustainable growth.”
In his tweet, Minister for Planning and Development Asad Umar said: “382 million $ current account surplus in Oct. This is the 4th month of current account surplus. Cumulative surplus jul to oct is $ 1.2 billion. We inherited the biggest current account deficit in history with monthly current account deficits of $2 billion when govt was formed!”
The situation regarding the current account had started changing in FY20. The current account deficit fell to $3bn in FY20, almost a quarter of last year’s level.
This improvement was broad-based as trade, services and secondary income accounts all showed better performances compared to last year.
The services trade deficit declined by 43.1pc to $2.8bn in FY20 from $5bn last year.
The State Bank’s annual report on economy FY20 stated that around 50pc of the decline in imports came from a fall in travel and transportation services. Workers’ remittances grew 6.4pc and reached $23.1bn in FY20, which helped the country reduce its current account deficit.
The external account improved significantly in FY20 as the current account deficit fell to a five-year low. This was mainly on the back of a significant contraction in both goods and services import payments and record high remittance inflows.
With the beginning of the new fiscal year (FY21), the country started posting current account surplus.
The SBP data also showed that the current account was surplus with $73m in October in FY20, indicating the trend of the previous year which finally helped the current fiscal year keep continue with the surplus track.
“In October, the current account surplus rose further to $382 million from $59 million in September, on the back of a sustained increase in remittances and smaller trade deficit,” said the State Bank.
The government announced a number of incentives to attract remittances through formal channels which resulted in a notable rise in the inflows also in FY20.
According the latest SBP data, trade deficit in October declined by 20pc to $1.49bn, compared to September. The 26.5pc growth in remittances during July-October FY21 attracted $9.43bn, helping the country improve its foreign exchange reserves. From July to October, remittances rose to $9.43bn, compared to $7.45bn during the same period last year.
Minister for Industries Hammad Azhar tweeted: “Pakistan’s economy continues to improve. Pakistan has posted a Current Account Surplus for the fourth successive month of the fiscal year (total $1.2BN). The Trade Deficit continues to Shrink and Industrial Production is showing Strong Growth.”
The State Bank recently said in a report that the lower current account deficit in FY20 significantly reduced the country’s need to arrange external financing. On a full-year basis, the sharp contraction in the current account deficit, along with support from international financial institutions (IFIs), led to a $4.9bn increase in the SBP’s liquid reserves and a $2.3bn decrease in the central bank’s net forward liabilities.
“The Pak rupee depreciated 4.8 per cent vis-à-vis the US dollar in FY20, which was less than depreciations recorded by many other EM (emerging market) currencies. Though the Covid-19 pandemic brought some disruption in Q4 — as export receipts declined sharply after growing in the first three quarters and as outflows were recorded from portfolio investments — the cumulative impact was offset by a steep fall in import payments and increased financing from IFIs,” said the report.
Published in Dawn, November 20th, 2020