RECORDER REPORT
KARACHI: The country’s current account recorded a $75 million surplus in August 2024 supported by healthy home remittance inflows.
After the consecutive 3-month (May-July) current account deficit, Pakistan has reverted back to current account surplus in August-2024. Previously, Pakistan’s current account posted a surplus of $491 million in April 2024. However, during May, June and July, the current account was in deficit.
The State Bank of Pakistan (SBP) on Wednesday reported that Pakistan’s current account turned into a surplus of $75 million in August 2024 compared to a deficit of $246 million in July 2024. This is the first current account surplus for FY25.
Cumulatively, the country’s current account deficit in the first two months of this fiscal year fell sharply 81 percent or $ 722 million. Pakistan recorded a deficit of $171 million in July-Aug of FY25 compared to $893 million in same period of last fiscal year (FY24). In July 2024, elevated workers’ remittance inflows and a substantial improvement in export earnings offset an increase in imports and helped contain the current account deficit and robust trend in workers’ remittances continued in August a well, which help to post a surplus current account.
Analysts also said that the improvement in current account is mainly due to higher workers’ remittances inflows, which clocked in at $2.9 billion in August 2024, up 40 percent YoY. Cumulatively, home remittances are up 44 percent to $5.93 billion in the first two months of this fiscal year (FY25).
During the period under review, trade deficit surged by 21 percent to $4.672 billion in July-Aug of FY25 up from $3.840 billion in corresponding period of last fiscal year. During the first two months of this fiscal year, the good imports increased to $9.534 billion and exports rose to $ 4.862 billion.
Analysts said that the current account surplus in August is a good sign for the country’s external account as the country is already facing a challenges of external debt payment.
The SBP in its recent monetary policy mentioned that the global macroeconomic environment also turned favorable as manifested by the substantial softening of crude oil prices and relative easing of global financial conditions.
Going forward, SBP expects that import volumes are expected to increase, in line with the ongoing domestic economic recovery. However, the improvement in the country’s terms of trade, mainly driven by softening crude oil prices, is expected to contain the overall trade deficit in FY25.
The MPC in its recent meeting said robust workers’ remittances and lower oil prices in the world market are expected to keep the current account deficit within the projected range of 0-1 percent of GDP in FY25.
The SBP believes that improved current account, along with the realization of inflows planned under the IMF program, will help further strengthen SBP’s FX reserves.
