KARACHI – Pakistan’s current account turned negative after experiencing surpluses in the previous three months of the outgoing fiscal year, State Bank said.
A statement issued by central bank reported a current account deficit of $270 million for May, following a $491 million surplus in April. In May FY23, the current account showed a surplus of $155 million.
Overall, Pakistan’s current account deficit (CAD) moved down by 88 percent to $464 million in the first 11 months of FY24, compared to $3.765 billion in the same period last year.
Quick changes were witnessed with surpluses of $128 million in February, $434 million in March, and $491 million in April. However, this trend reversed in May. Meanwhile, current account deficit may widen further in June, the final month of the fiscal year.
Experts linked the trend reversal to debt servicing and easing imports in the second half of the fiscal year. SBP governor recently disclosed that the country paid $2 billion in debt repayments, with another $8 billion due in the next two months.
Fresh data shows merchandise exports increased to $28.7 billion in July-May compared to $25.8 billion in 11MFY23, while goods imports remained almost unchanged at $48.4 billion, compared to $49.5 billion last year.
Services exports rose to $7.1 billion in 11MFY24 from $7 billion in the same period last year, but services imports increased by $1.33 billion. The trade deficit in services widened to $2.1 billion, compared to a deficit of $887 million in the same period last year.
The balance of payments gap significantly narrowed to $464 million in 11MFY24, down from $3.28 billion in FY23 and a staggering $17.48 billion in FY22.
This substantial decline resulted from managed imports and tight control of dollar outflows.
The SBP enforced strict controls, disallowing outflows of profits and dividends on foreign investments in FY23. While some restrictions were eased in FY24, informed bankers noted that not all profits and dividends were permitted to leave the country, even this fiscal year. This relaxation followed the IMF’s intervention in easing imports.
The reduced imports led to economic contraction in FY23, with FY24 expected to post a modest growth of 2.3 percent.
“Managing the current account is a success, but the government needs to achieve a balanced economy, which is currently lacking,” said a banker knowledgeable about the stuck profits and dividends on foreign investments in Pakistan.
