By Staff Reporter
KARACHI: Pakistan posted a current account surplus of $255 million in May, compared with a deficit of $1.5 billion in the same month last year, the central bank said on Monday, as a sharp fall in imports and a rise in exports helped improve the country’s external balance.
The State Bank of Pakistan (SBP) said the current account surplus was higher than the $78 million recorded in April and marked the third consecutive month of surpluses.
The improvement in the current account balance was mainly driven by a 33 percent year-on-year decline in imports to $3.8 billion in May, as the government imposed restrictions on non-essential imports to curb the trade deficit and conserve foreign exchange reserves.
Exports, meanwhile, increased by 24 percent year-on-year to $2.6 billion in May, boosted by higher demand for textiles, rice and other goods from key markets such as China, the United States and Europe.
Remittances from overseas Pakistanis also remained strong, although they fell by 10.4 percent year-on-year to $2.1 billion in May. In the first 11 months of the fiscal year that ends on June 30, remittances totalled $24.8 billion, up 13 percent from the same period last year.
The SBP said the current account deficit for the July-May period narrowed by 81 percent to $2.9 billion from $15.2 billion in the same period last year.
“The lower trade deficit has supported the current account balance,” said Samiullah Tariq, head of research at Pak-Kuwait Investment Company. “However, higher exports came as a surprise.”
The country had a deficit of $1.5 billion in May 2022. Fahad Rauf, head of research at Ismail Iqbal Securities, said the current account surplus exceeded expectations.
“The trade deficit came in at $1.2 billion, compared to $2.1 billion reported by the Pakistan Bureau of Statistics,” he said. “Both exports and remittances were better than the PBS numbers.”
“The increase in the surplus on a month-on-month basis was mainly due to higher goods exports, which rose to $2.6 billion from $2.1 billion in April,” he added.
The lower current account deficit has eased some pressure on Pakistan’s external account, which has been under strain due to dwindling foreign exchange reserves and uncertainty over the fate of an International Monetary Fund (IMF) loan programme.
Pakistan has about $4 billion in reserves, barely enough to cover one month of imports, and faces debt repayments of about $23 billion next fiscal year, starting July 1.
The IMF has withheld the release of the next tranche of its $6.7 billion bailout package since November, pending agreements financing gap.
The IMF has also expressed concerns over the credibility of Pakistan’s budget for the next fiscal year, which projects a lower fiscal deficit and higher revenue collection than most analysts expect.
Former SBP governor Reza Baqir and former finance minister Miftah Ismail have warned that Pakistan could face a sovereign default if it fails to secure more IMF funding and other sources of external financing.
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