DRIVEN by a major spike in workers’ remittances last month, the country’s current account posted a record monthly surplus of $1.2bn, surpassing the previous high of just below $1bn in 2012. Yet the balance-of-payments turned negative for the fifth month during the ongoing year due to weakening foreign official and private capital inflows amid heavy debt payments — though overall, the July-March balance-of-payments remains positive. The cumulative nine-month surplus of just less than $2bn has reinforced hopes of the current account closing the present fiscal year with a surplus, encouraging the State Bank to upgrade its foreign exchange reserves projection from $13bn to $14bn at the end of June as the authorities are hopeful of some planned foreign inflows materialising after the disbursement of the second IMF loan tranche.

On the face of it, the current account surplus lends a feeling of external stability. In a way, it is a sign of a stable external account: pressure is off the currency; reserves are rising; debt payments are being made on time; etc. But this stability is not durable and is founded on factors like controlled trade deficit due to unspoken curbs on imports, lower global oil prices amid the tariff war launched by America, and most importantly, a massive unexpected surge in remittances. In the emerging global scenario, even the slightest shock can cause harm. Sustainable external account stability depends on a strong financial account. Simply put, it is long-term FDI and official flows and a country’s export earnings that guarantee durable improvement in its balance-of-payments position, and help it build up international reserves. If these flows are not improving, it indicates defects in the economy’s structure. While the increase in remittances leading to a stable current account is welcome, it would be unfortunate if our policymakers did not use this respite in the economic crisis to put the economy on a strong, more sustainable footing.

Published in Dawn, April 19th, 2025