KARACHI: The current account posted a surplus in February, contrary to the preceding month, raising hopes that the government would achieve the current deficit target for fiscal year FY24.
According to data released by the State Bank on Tuesday, the current account was $128 million in surplus last month, compared to a deficit of $303m in January and a deficit of $50m in Feb 2023.
The State Bank, in its monetary policy announced on Monday, expressed the hope that the CAD would remain in the range of 0.5 to 1.5 per cent of GDP at the end of FY24.
The current account surplus comes as a great relief for the government at a time when it is struggling to arrange money for debt servicing and asking for help from donor agencies.
Experts worry deficit being curbed at the cost of economic growth
The imbalances on external account of the country hit the entire economy so hard that it crushed the growth rate in FY23 and the problem of debt servicing is still unresolved.
Sources in the finance ministry believe that $25bn would be needed for debt servicing in FY25. This huge burden poses a persistent threat to the economy. The previous governments failed to come up with any remedy; instead they remained busy borrowing money to avoid a sovereign default.
No economic policy was introduced to get rid of the debt servicing menace.
According to the central bank, the current account deficit was $1bn during the period July 2023- Feb 2024, against $3.846bn in the same period of the last fiscal year. It seems to be a good achievement, but economists have been warning that this reduced CAD is being achieved at the cost of economic growth.
They argue that the move to restrict imports is hindering economic growth. Experts said low economic growth, allied with high inflation, had curtailed the current account deficit but had retarded growth.
During the first eight months of the current fiscal year, imports stood at $41bn while exports were recorded at $25.6bn.
Importers have been asking the government to relax rules for imports while the IMF has been pressing for increasing imports by 50 per cent in the second half of the current fiscal year.
The State Bank’s reserves have fallen to as low as $8bn and the SBP is waiting for release of $1.2bn from the IMF as last tranche of $3bn Stand-By Arrangement.
Pakistan is currently negotiating the approval of an aid package with the IMF that could hover around $8bn.
This is another move to collect dollars for debt servicing in FY25.
No government has so far come up with any strategy to rescue the country from the debt trap; instead all of them tried to develop good relations with the IMF.
The IMF represents the ‘main gate’ that opens doors for other inflows.
Published in Dawn, March 20th, 2024
