Current account shows surplus of $ 881 million in July-February
KARACHI: Pakistan’s current account posted a surplus of $ 881 million in the first eight months of the current fiscal year 2020/21, down from a deficit of $ 2.7 billion a year earlier, reported Sunday the central bank, due to increased remittances and inflows of foreign debt. offset the impact of the worsening trade deficit.
“The current account surplus is helped by continued strong growth in workers’ remittances and a sustained recovery in exports since November 2020 in year-over-year terms, which more than offset the increase in imports due to shortages. national food and economic recovery, ”the SBP wrote in a tweet.
Remittances rose 24.1% to $ 18.7 billion in the eight months of this fiscal year. Merchandise exports fell 2.3% to $ 16 billion in July-February 2021. Imports amounted to $ 32.1 billion, up $ 8.6 billion from the year former.
The current account deficit narrowed to $ 50 million in February, from $ 197 million the corresponding month a year earlier and $ 210 million in January. SBP data showed that the current account deficit narrowed to 0.2% of GDP from 0.9% a year ago.
Robust growth in remittances before Ramazan was the main driver behind the narrowing of the current account gap, according to the SBP. In February, remittances rose 24.2% to $ 2.2 billion, while merchandise exports rose 8.6% to $ 2.1 billion. Imports also increased 26.8% to $ 4.5 billion. The latest current account figures marked a sharp turnaround from December, when the country posted a heavy current account deficit of $ 652 million.
The trade deficit is widening due to surging imports of capital goods and industrial raw materials as the economy recovers from the deadly consequences of the coronavirus lockdown and international commodity prices rise. The central bank expects the current account deficit for fiscal 2021 to be less than 1% of GDP due to the increase in remittances, the recovery in exports and the resumption of the Fund’s program international monetary policy (IMF). “The recent staff level agreement on the resumption of the IMF program has boosted the outlook and ensured that external financing needs will be comfortably met,” the SBP said in a latest monetary policy statement.
“These favorable developments and improved sentiment have contributed to an additional 3.4% appreciation of the PKR since the last MPC. [monetary policy committee] meeting, which is now near a one-year high, and has kept SBP’s foreign exchange reserves around $ 13 billion, levels unprecedented three years ago. The IMF reinstated Pakistan’s $ 6 billion loan program after a one-year hiatus, as the country agreed to introduce tax reforms to generate additional income. Last March, the IMF halted discussions with Pakistan on the second review of the three-year extended finance facility program following the coronavirus infection. The conclusion of this review is to release the third tranche of $ 500 million under the facility.
External debt and liabilities rose $ 3 billion or 2.6% in the six-month period ended last December, according to SBP.