By Staff Reporter
KARACHI: The current account deficit narrowed sharply to $98 million in August, the State Bank of Pakistan reported on Wednesday, as a jump in remittances from overseas workers offset a widening trade gap.
The shortfall compares with a $445 million deficit in July and $324 million in the same month a year earlier. The improvement leaves the two-month tally for the current fiscal year at a cumulative deficit of $543 million, down 36% from the $853 million gap recorded over the same stretch of the prior year.
The August reading underscores a familiar pattern for Pakistan’s external accounts: a persistent goods-trade deficit that remittances and, to a lesser extent, services exports, help paper over. Total exports of goods and services rose to $3.33 billion in August from $3.17 billion a year earlier, an increase of more than 5%. Imports climbed faster, reaching $6.64 billion versus $6.15 billion, a rise of more than 8%.
Remittances Do the Heavy Lifting
Money sent home by Pakistani workers abroad rose to $3.66 billion in August from $3.14 billion a year earlier, an increase of nearly 17%, the SBP data showed. Remittances have long served as the single largest offset to Pakistan’s chronic merchandise trade deficit, and the August figure points to continued strength in flows from the Gulf states and other major expatriate destinations even as the broader current account stayed in the red.
The central bank’s secondary income balance — the broader category that captures remittances alongside other transfers — came in at $3.89 billion for the month, comfortably outweighing the deficit on trade in goods and services, which stood at $3.31 billion in August.
Trade Deficit Still the Core Drag
Goods exports totalled $2.46 billion in August against goods imports of $5.49 billion, leaving a trade-in-goods shortfall of just over $3 billion for the month, little changed from July. Services added a further, smaller deficit, with exports of $872 million against imports of $1.16 billion.
The wider goods-and-services trade gap of $3.31 billion in August was largely absorbed by transfer inflows, leaving the primary income account — payments and receipts tied to investment income, including profit repatriation by foreign companies and interest on external debt — as the other principal drag. Pakistan recorded a primary income deficit of $672 million for the month, bringing the two-month total to $1.52 billion.
Reserves Build Further
Foreign exchange reserves held by the State Bank, excluding cash reserve requirements, rose to $17.28 billion, up close to 19% from $14.47 billion a year earlier, the data showed. Including the CRR/SCRR component, SBP gross reserves stood at $18.49 billion at the end of August, up from $15.66 billion a year prior.
The rebuild in reserves comes despite the current account remaining in deficit, pointing to net inflows elsewhere in the balance of payments, including financing activity captured in the financial account, which recorded a net inflow of $346 million in August after a $832 million outflow in July.
For the first two months of the fiscal year that began in July, Pakistan’s current account deficit of $543 million marks a considerable improvement from the $853 million gap over the same period last year, a reduction of roughly 36%. Export growth for goods over the comparable period was recorded at 4.0%, against import growth of 11.4%, according to the SBP’s data, underlining that the narrower deficit owed more to transfer inflows than to any rebalancing of trade.
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