KARACHI: Pakistan – for the third month in a row – posted a current account surplus in May due to growth in exports, JEE News reported citing data released by the State Bank of Pakistan (SBP).
The country posted a surplus of $255 million in May from $78 million recorded in April as the country’s trade deficit narrowed due to import restrictions. Apart from this, there was a significant increase in exports this time.
Samiullah Tariq, head of research at the Pakistan-Kuwait Investment Company, said: “The lower trade deficit has supported the current account balance.”
In the same month last year, the country recorded a deficit of $1.5 billion.
Fahad Rauf, head of research at Ismail Iqbal Securities, said that the current account surplus is higher than expected.
“The trade deficit came in at $1.2 billion, compared to the Pakistan Bureau of Statistics’ estimate of $2.1 billion,” he said. “Both exports and shipments were better than the PBS numbers.”
“On a month-on-month basis, the increase in surplus was mainly due to higher goods exports, which rose to $2.6 billion from $2.1 billion in April,” he added.
However, imports rose 3 percent month-on-month to $3.8 billion in April. Imports fell 33 percent year-on-year in April.
Remittances declined by 13 percent to $24.8 billion in the 11 months of the current fiscal year. In May, inflows fell 10.4 percent year-on-year to $2.1 billion. Remittances declined by 4.4 percent month-on-month.
The country’s current account deficit for the 11 months of the current fiscal year (July-May) was $2.9 billion, which is 81 percent lower than the deficit of $15.2 billion in the same period last year.
Despite the current account surplus, the overall balance of payments situation remains bleak, with foreign exchange reserves of $4 billion—enough to cover one month’s worth of imports—remaining at low levels.
The International Monetary Fund’s (IMF) criticism of Pakistan’s recent budget is a sign that there is an increasing likelihood that the lender will end its long-awaited bailout program before it expires at the end of June. will decide against providing assistance. This is likely to lead to a significant depreciation of the dollar in the first half of the fiscal year starting in July.
The government currently has foreign exchange reserves of $4 billion. Those reserves will fall by the end of June without IMF support, as there is at least $900 million in debt that needs to be repaid this month.
Pakistan will have to make additional payments totaling $4 billion between July and December. By the start of the fiscal year in 2024, foreign exchange reserves are likely to fall below $4 billion, making a default highly likely. In the absence of an IMF program, new external funding options are likely to be quite limited.
