Daily Times

The current account balance has posted a surplus of $800 million during the first 10 months (July–April) of 2020-21 as compared with a deficit of $4.7 billion in the corresponding period of the last fiscal year.

According to statistics released by the State Bank of Pakistan (SBP) through tweets on Tuesday, deficit of trade and service has widened by $22.736 billion during the first ten months of the current fiscal year as compared to the deficit of $20.599 billion in the corresponding period of the last fiscal year.

Primary balance has shown a deficit of $4.025 billion during the period under review as it narrowed from the deficit of $4.64 billion in the same period of the last fiscal year.

“With the economy rebounding strongly in FY21, imports are picking up but are offset by unprecedented growth in remittances and recovery in exports. With the CAB contained and FX reserves at a 4 year high, the economic revival is on a sound and sustainable footing, the SBP said.

The major component in surplus of the current account is significant rise in worker remittances. The inflow of remittances increased to $24.24 billion during July–April 2020-21 when compared to $18.79 billion in the corresponding period of the last fiscal year.

The current account balance posted a deficit of $200 million in April 2021 as compared with deficit of $33 million in March 2021 and deficit of $510 million in April 2020.

Analysts at Arif Habib Research said that it is quite certain that Pakistan is likely to end up with a Current Account (CA) surplus this fiscal year (FY21) of around $607 million. This surplus comes after a gap of 10 years, last witnessed in FY11 of USD 214 million. Despite an expectation of more than 100 percent jump in the trade deficit compared to FY11’s figure, the primary reason for this surplus is the unprecedented and spiralling jump in remittance flows- defying the initial prediction of a decline due to the pandemic.

Moreover, the government seems to be in a comfortable zone given the foreign reserves floating around the US $23 billion mark, providing further support to the overall external position.

As for the statistics, the SBP expects CAD to clock in below 1 percent of GDP for FY21 due to strong remittances and high value-added textiles-led exports. However, in FY22, we may see the current account balance slipping into deficit (USD 4.4 billion), as trade deficits widens with imports picking up and workers remittances staying stable at the current levels (above USD 2.3 billion per month).