KARACHI: The country’s current account (C/A) has been showing deficit each month since December 2020, but it remained in surplus with $773 million during the first 10 months of 2020-21 — reflecting the additional support of higher remittances and exports.

The latest data issued by the State Bank of Pakistan (SBP) on Tuesday showed that the current account deficit (CAD) contracted by almost 61 per cent to $200m in April against $510m in the same month last year.

The $773m surplus during 10MFY21 has, however, changed the economic situation for the government, which has been struggling to reduce the highest-ever CAD of $20bn in FY18. Even if the remaining two months (May and June) witness deficits, the C/A would end up with surplus in FY21.

The SBP has recently said that the country has posted a current account surplus this fiscal year after a gap of 17 years which will help the economy to come out from the huge pressure of deficits prevailing for a long period.

In April CAD shrank 61pc year-on-year to $200m

The CAD was $4.657bn in 10MFY20 which has now turned into a surplus in the same period of FY21 helping the economy to stabilise on external fronts like higher foreign exchange reserves and stable exchange rate.

The country succeeded in keeping its current account surplus despite increasing trade deficit which widened by 21.6pc to $23.83bn during July-April FY21. This was against the trade deficit of $19.59bn in FY20.

The growing imports helped the economy to produce more exportable products generating higher economic activities.

Government officials maintain that the higher imports supported the economic growth, which would be 3.94pc in FY21 as was provided by the National Accounts Committee (NAC) and was fully supported by the SBP announcing that the GDP growth figure was unanimous.

During the 10MFY21 the exports increased 13.5pc to $20.9bn compared to $18.4bn in the same period last year. However, imports during the July-April period increased by 17.7pc to $44.7bn, showing a trade deficit of $23.8bn.

The negative impact of huge trade deficit was mitigated by the unexpected higher remittances during this period. The remittances during the 10MFY21 increased by 29pc to $24.24bn.

The country’s foreign exchange reserves hit four-year high at $22.9bn on May 7. The higher imports did not impact enough to bring the current account in deficit.

After December 2020, the CAD started declining. In December it was the highest at $652m then $210m in January, $50m in February, $33m in March and $200m in April.

Published in Dawn, May 26th, 2021