Pakistan’s current account posts a surplus

Pakistan’s current account in the month of May posted a surplus of $13 million, data released by the State Bank of Pakistan (SBP) showed on Tuesday. 

“Pakistan’s current account turned into a surplus of $13m in May, 2020 against a deficit of $530m in April 2020 and $1.004 billion in May …. On a cumulative basis, the current account deficit has narrowed by 73.6 per cent to $3.3bn during Jul-May FY20 from $12.5bn during the same period last year,” said the SBP.

Pakistan’s current account deficit in the July-May period plunged by 73.6pc to $3.3bn from $12.5bn in the corresponding last year. 

The government, over the last two fiscal years, has been successful in narrowing the current account gap, which peaked at $19.9bn in fiscal year 2017-18. The sharp increase in the deficit came as a result of ballooning import bills and lacklustre growth in exports of services and products.

However, the PTI-led government, after coming into power, launched a range of measures to bring down the import bill including ban on import of used vehicles, increasing duties and taxes on luxury items etc. Economists in the country have criticised the government for focusing solely on import compression instead of providing incentives for increasing exports.

The import compressing measures helped the government reduce the current account deficit, which for the first time in a long period, went into a surplus of $99m in November, 2019.

The surplus in May comes despite stagnant growth rate of exports. The latest data published by the Pakistan Bureau of Statistics showed the country’s exports during the July-April period of the currency fiscal year improved by a meagre 2.4pc to $19.47bn, compared to $20.1bn during the same period last fiscal year. 

But the current account was bolstered by a significant improvement in foriegn direct investment and slight growth in inward remittances. During the July-May period, FDI into the country increased by whooping 91pc to $2.4bn compared to $1.26bn during the same period last fiscal year.

Remittances have also seen steady growth during the current fiscal year, increasing by 2.7pc to $20.65bn.