KARACHI: The country’s current account posted a surplus of $447 million in November — the fifth consecutive month since July.

The State Bank’s latest data issued on Tuesday showed the current account surplus in November increased by 7.7 per cent from $415m surplus in October.

However, during July-Nov FY21, the surplus rose to $1.64 billion against a net current account deficit of $1.745bn in the same period of last fiscal year.

The increasing current account surplus would help the country build its foreign exchange reserves which would subsequently stabilise the exchange rate. The State Bank of Pakistan’s (SBP) foreign exchange reserves have hovered around $12.5bn to $13.3bn during the current financial year. The exchange rate witnessed fluctuations during FY21 but stabilised around Rs160 per US dollar.

The data also showed that the current account surplus in November this year was $447m against the net deficit of $362m in November last year. This improvement was due to several reasons including but not limited to massive cut in imports bill, higher inflows through remittances and improved export proceeds.

The SBP and government’s efforts to manage its external account in the last fiscal year helped narrow down the country’s current account deficit by 75pc to $3bn. 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 in the preceding year.

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.

Meanwhile, during the first five months of the current fiscal year, remittances rose by an impressive 27pc to $11.8bn. The higher trend of inflows supported the external account.

The government announced a number of incentives to attract remittances through formal channels leading to a notable rise in these inflows in FY20 also.

Despite higher inflows in the current fiscal year, the SBP recently warned that hundreds of thousands of workers are at risk of losing their jobs in the Arab countries and urged the government to prepare a contingency plan to settle them and their families in Pakistan upon their return. However, so far, the government has not come out with any such plan.

On Monday, the government successfully negotiated and concluded rescheduling agreements with 19 bilateral creditors, including members of the Paris Club.

Pakistan secured a $1.7bn debt relief agreement to help offset the financial headwinds sparked by the Covid-19 pandemic.

The SBP data reveals that both exports — goods and services fell during the first five months of the current fiscal year. Goods exports fell to $9.55bn compared to $10.285bn last year whereas those of services also declined to $2.158bn compared to $2.284bn.

The import of goods and services also fell to $21.246bn during the five months under review compared to $22.122bn.

Published in Dawn, December 23rd, 2020