KARACHI: The current account posted a nine-year-high surplus in March, making it possible for the country to bring down the overall deficit to below $1 billion during the July-March period of FY24.

The March surplus was much higher than February’s $98m.

The latest data issued by the State Bank on Monday shows the current account was $619 million in surplus last month — a rise of 15.3 per cent over $537m recorded in March 2023. The account had posted a surplus of $801m in Feb 2015.

The data further reveals that the current account deficit had come down to $805m at the end of the third quarter (nine months) of FY24. The deficit stood at $4.313bn in March last year.

The country has been trying hard to bring down the current account deficit as it eats up most of the export earnings and compels the country to borrow from external sources for meeting the twin deficits: in trade and current account.

The country was on the brink of sovereign default by the end of June 2023, but a timely support of $3bn Stand-by Arrangement from the IMF helped it avoid a default.

Remittances

After the IMF assistance, the government took serious steps to slash imports to reduce the trade deficit and was ultimately able to bring down the current account deficit. This drastic step to slow down demand proved injurious for the economy, resulting in negative GDP growth in FY23 and with the nation struggling to achieve a two per cent growth.

According to analysts, the March surplus was mainly due to higher exports in the IT sector and a jump in remittances due to Ramazan.

Pakistan received about $3bn in remittances last month — a 0.9 per cent rise during July-March FY24. The same period of the last fiscal saw a decline of 9.4 per cent.

The Jan-March period was the first quarter of FY24 that posted a current account surplus of $324m. The July-Sept FY24 period recorded a deficit of $1.118bn while the Oct-Dec quarter witnessed a deficit of only $11m.

Analysts believe that the fiscal year FY24 may witness a zero current account deficit and this would strengthen the government’s hand in negotiations with the IMF.

With the government considering launching Eurobonds in the international market, the zero CA may create space for it.

The finance minister had said recently that the government wanted to launch $300m Panda bonds in the Chinese market. A zero current account deficit would help the government tap the Chinese market.

Published in Dawn, April 23nd, 2024