By Staff Reporter
KARACHI: Pakistan saw its first current account surplus in two and a half years in March, as government restrictions on imports helped boost the country’s balance of payments, State Bank of Pakistan (SBP) data showed on Wednesday.
The $654 million surplus marked a significant contrast to the $36 million deficit recorded in February. The country last saw a current account surplus in November 2020, when pandemic restrictions were in place. March’s current account surplus is the largest since February 2015.
The increase was primarily driven by a rise in remittances, which climbed 27 percent month-on-month to $2.5 billion, while imports declined by 35 percent year-on-year.
However, the country’s low economic activity, job losses, and industrial unit closures continue to impact its overall economic performance.
Remittances rose due to the month of Ramazan and the Eid festival, during which Pakistani expatriates send more money home, and the depreciation of the rupee.
After the difference between the official and unofficial rates of the local currency was erased, the trend in remittances started to improve. Though, remittances fell 11 percent to $20.5 billion in the first nine months (July-March) of the current fiscal year.
Fahad Rauf, an analyst at Ismail Iqbal Securities, said that “the trade deficit is being managed through strict restrictions on imports. Once the imports are allowed, we can have a fair idea of how much of the import decline is on account of demand destruction and what part is due to administrative actions.”
While Pakistan’s current account balance has improved, the country’s external balance of payments remains challenging, with foreign exchange reserves of only $4 billion – enough to cover one month’s worth of imports.
Analysts at Topline Securities believe that import controls will be removed gradually, and the current account balance will remain muted for the remainder of the year.
They estimate a current account deficit of $3.5 billion for fiscal year 2023. The SBP expects the current account deficit to remain below $6 billion.
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