Pakistan’s current account has a balance after more than two years
In March, Pakistan’s current account showed a surplus of $654 million. This was because imports fell because of restrictions and payments went up because it was Ramadan.
Wednesday, figures from the State Bank of Pakistan (SBP) showed that the current account had a surplus for the first time since November 2020. The surplus of $654 million was the highest since February 2015 and was the first time the current account had a surplus since November 2020.
Last month, the current account deficit, which is the difference between what a country spends and what it brings in, was $74 million.
Overall, the current account deficit was $3.4 billion for the first nine months of the current fiscal year. This is 74.1% less than it was from July to March 2022.
Dr. Khaqan Najeeb, a former financial adviser, said that steps taken to lower the deficit, such as limiting imports, have slowed the rate of growth.
He called the surplus a “significant” change and said it was because of a $2.5 billion rise in remittances during Ramadan and the fact that imports were still being limited.
“The tightening of imports (down 21% in March compared to the same month last year) as a short-term solution to the current account deficit has lasted longer than planned. This has hurt the economy because growth has slowed to almost nothing and unemployment has gone up,” Dr. Najeeb said.
This graph shows how much money has been in the current account over the last few months. — Pakistan State Bank
This graph shows how much money has been in the current account over the last few months. — Pakistan State Bank
Samiullah Tariq, the head of research at Pakistan-Kuwait Investment Company, told Geo.tv that the drop in imports had made up for the drop in exports and earnings.
The latest SBP data showed that the amount of goods imported in March was $4bn, which was 34.7% less than the same month last year. On the other hand, goods exports dropped 21% to $2.4bn.
Also, payments fell 10.7% year over year to $2.5bn in March.
When the country’s foreign exchange reserves dropped to a dangerously low level last year, the government chose to only allow “essential items” to be brought in. Even though some of the limits have been eased since then, businesses in all fields have said that banks are not opening letters of credit (LCs). Several companies, especially in the car industry, have temporarily shut down plants because they don’t have enough inventory.
The International Monetary Fund (IMF), the World Bank, and the Asian Development Bank have all cut their growth projections for Pakistan. They now think that the economy will grow between 0.4% and 0.6% this fiscal year.
Dr. Najeeb also said that going forward, the government needs to reach a deal with the IMF that would allow the country to get the over $1 billion it needs to avoid going bankrupt. The deal with the IMF would also make it possible for other foreign lending agencies to give more money.
The former assistant also said that the government needs to find a way out of the dollar liquidity crunch.
As of April 7, the central bank’s funds are only $4 billion, which is not even enough to cover a month’s worth of imports.