In contrast to the surplus of $225 million reported in May 2023, the nation’s current account produced a surplus of $334 million in June 2023.
State Bank of Pakistan (SBP) records show that the total current account deficit (CAD) decreased to $2.56 billion in July-June FY23, down from $17.48 billion in July-June FY22. This represents an 85.3 percent year-over-year decrease.
Current Account Surplus for Consecutive 4 Months
The country’s current account has reported an increase for the fourth month in a row as a result of numerous import restriction measures.
Current Account recorded a surplus of $334 million in Jun 2023.https://t.co/Od8ikVvXrd#SBPBOP pic.twitter.com/llVGIKiKNa
— SBP (@StateBank_Pak) July 18, 2023
For the first time since November 2020, the country’s current account generated a surplus in March. Pakistan had a $17.481 billion current account deficit in FY22.
When foreign revenue exceeds foreign spending, a current account surplus is created.
Letters of credit (LC) limitations last fiscal year spread across all industries as a result of the government’s decision to prohibit trade in return for a current account surplus.
Khurram Schehzad, the CEO of Alpha Beta Core Securities said, ” CAD stood at 0.7% of GDP in FY23 vs a 4.7% deficit in FY22. Import restrictions helped contained the external deficits, however, played heavily on the domestic economy, in terms of the massive decline in manufacturing, slowing down businesses and industries, affecting investment, employment, and inflation.
FY23 was choosing between growth and stability given the precarious situation and acute availability of foreign exchange.”
The government has removed all limits on credit letters for the upcoming fiscal year (2023–24), which might cause the current account to slip back into deficit.
This is quite likely because the nation is getting ready to restart its industrial operations and will import large quantities of raw materials.
This will cause fiscal expenditure to exceed foreign revenue in the upcoming cycles, thus keeping the CAD in the red unless income outpaces expenditure.
To read our blog on “Pakistan’s current account in surplus for straight 3 months,” click here.
