KARACHI: Pakistan’s current account posted a third straight monthly surplus in October, reflecting consistency in the government’s policy to restrict imports.
According to the State Bank of Pakistan’s data, released on Monday, the country witnessed a $349m surplus in October compared to $86m in September.
It was highly encouraging for the government to see the current account with a positive $218m during the July-October period against a deficit of $1.528 billion in the corresponding period last year.
It was a “big achievement” for a government facing massive debt servicing. Sources in the financial sector believe the government has not yet been able to get a rollover for $14bn to reduce $26.2bn debt repayment obligations in the current fiscal year.
Surge in remittances is seen as a major contributor
The government, however, is confident that the current account by the end of FY25 would be positive or post a manageable deficit.
Data showed that the improvement in the current account was primarily due to a handsome increase of 34.7pc in remittances in the first four months of FY25, a 32pc increase in foreign direct investment and a marginal growth in imports and exports.
Experts said the surplus was a cumulative impact of these factors, while exports should be on a much higher side to narrow the large trade deficit — a chronic threat to the current account surplus.
The country’s total export of goods and services amounted to $13.11bn during the first four
months, while imports amounted to $22.43bn in 4MFY25. The trade gap widened to $9.31bn compared to $8.1bn last year.
Exchange rate
Experts believe the stable rupee since the start of the current fiscal year is due to a positive current account. The exchange rate has supported the economy as imports and exports have been in the comfort zone this fiscal year. Exporters are selling their maximum export proceeds, while importers have no fear of any sudden jump in dollar rates.
Currency experts think that even though a large payment on account of debt servicing is due, the exchange rate has been stable only because of the current account surplus — an indicator of stability.
Published in Dawn, November 19th, 2024
