KARACHI: The current account recorded a fourth consecutive surplus of $729 million in November, marking the second-highest surplus since July 2013, while the surplus for the first five months of the current fiscal year approached one billion dollars.

The latest data released by the State Bank on Tuesday revealed a current account surplus of $944 million for July-Nov FY25, compared to a deficit of $1.676 billion during the same period last fiscal year. The November surplus appears to be a turning point for the current account, jumping by $729m compared to $215m in the first four months of the current fiscal year. In November FY24, the current account was in deficit by $148m.

Although the country has seen unexpectedly positive results, particularly in the external account, exports have shown little improvement during the first five months. Remittance inflows are expected to rise by $5bn by the end of the current fiscal year, with the government anticipating a total of $35bn in FY25, compared to just over $30bn in FY24.

Bankers and currency experts attribute the increase in remittances mainly to the crackdown on illegal currency businesses, which has forced remitters to use banks and other legal channels to send their money.

November turns positive by $729m

Financial experts said the current account surplus played a crucial role in stabilising the exchange rate and helped the State Bank improve its foreign exchange reserves. The State Bank governor recently announced that the central bank aimed to increase reserves to $13bn in FY25, in line with the government’s target.

During a briefing with analysts following the monetary policy announcement, the SBP governor highlighted that the country had to pay $26.1bn in debt servicing. Of this, $10.4bn, including rollovers, has already been paid, with another $5bn (excluding rollovers) due in the remaining part of FY25.

During July-Nov FY25, goods exports increased to $13.3bn, up from $12.3bn in the same period last fiscal year, showing a $1bn rise. Services exports also saw a slight increase, rising to $3.276bn compared to $3.043bn last year.

In contrast, imports grew significantly, reaching $22.97bn, up from $21.2bn, marking a $1.77bn increase. The import of services also rose to $4.424bn, compared to $4.3bn during the same period last fiscal year.

The trade gap for the first five months of FY25, as per State Bank data, stood at $10.85bn. Total imports of goods and services amounted to $27.4bn, while exports of goods and services totalled $16.55bn.

Financial experts said the current surplus will help maintain exchange rate stability and attract foreign investors, provided political uncertainty is resolved. However, there is concern in the market that restricted imports in certain sectors may hinder significant economic growth. The experts said the government’s policy is to maintain a current account surplus with limited imports, while higher remittances are already supporting this strategy.

“Low economic growth works in favour of the government,” said one expert.

Published in Dawn, December 18th, 2024