Current account deficit narrows by 91% as remittances, exports overtake imports

Exports rose 21% year-on-year to $2.762 billion while total imports fell 7% to $4.346 billion.

Symbolic image of containers placed at a port.  - Reuters/File
Symbolic image of containers placed at a port. – Reuters/File
  • Exports in October rose 21% year-on-year.
  • The deficit declined to $74 million in the same month.
  • Overseas Pakistanis remitted $2.463 billion.

KARACHI: Pakistan’s current account deficit narrowed 91% in October from a year earlier as remittances from overseas Pakistanis, lower imports and improved exports boosted the country’s external balance. news The report cited State Bank of Pakistan (SBP) data on Tuesday.

According to the data, the country’s deficit narrowed to $74 million in October as exports rose 21% year-on-year to $2.762 billion, while its total imports fell 7% to $4.346 billion.

Pakistanis working abroad sent home $2.463 billion in October, an increase of 10%.

However, on a month-on-month basis, the current account deficit widened by 61% in October compared to the previous month, mainly due to a widening trade gap due to increased imports.

Although October’s deficit was larger than September’s, at 46%, analysts said it was the second month in a row that the current account balance was almost at breakeven.

The country’s imports increased by 9% in October. It appears that Pakistan’s import bill has increased due to volatility in international oil prices amid the Middle East conflict. The modest increase in imports also reflects the improvement in aggregate demand in the country’s economy.

The country’s merchandise exports rose 12% in October and remittances rose 12% month-on-month. Pakistan’s current account deficit declined by 66% to $1.1 billion in the first four months (July–October) of the current financial year. This was mainly due to the government’s policy of maintaining the trade deficit and, consequently, keeping the current account deficit at a sustainable level in the face of low foreign exchange reserves.

Analysts estimate the deficit this fiscal year to be manageable as planned foreign inflows are likely to materialise. According to Sana Tawfik, economist and analyst at Arif Habib Ltd., the current account deficit is expected to reach about $4.1 billion in fiscal year 2024.

“Given that expected financing from bilateral and multilateral partners will support the country’s foreign exchange reserves, the deficit appears sustainable,” Taufik said.

“Furthermore, over the next months, it was expected that the government would stick to its policy of prioritizing imports of necessities over all other goods, especially non-essential goods. It is unlikely that the government will allow full import of non-essential items until the stock situation improves.

Last week, International Monetary Fund (IMF) staff and Pakistani officials reached a staff-level agreement on the first review under Pakistan’s Stand-By Arrangement (SBA), subject to approval by the IMF Executive Board.

If approved, the country is expected to receive approximately $700 million, bringing total disbursements under the SBA to approximately $1.9 billion. As of November 10, Pakistan’s foreign exchange reserves stood at $12.5 billion, up from $8.5 billion in May.

It is estimated that Pakistan will receive approximately $1.2 billion in financing from the World Bank, Asian Development Bank, and Asian Infrastructure Investment Bank before the end of the year. The government also expects more investment from Saudi Arabia and the United Arab Emirates to support the country’s economy.

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