As a result of rising exports, Pakistan’s current account surplus widened in May, according to figures from the State Bank of Pakistan (SBP), as reported by The News.
May’s surplus of $255 million was an increase from April’s surplus of $78 million, as import restrictions helped reduce the trade deficit. There was also a notable increase in exports.
According to Samiullah Tariq, head of research at the Pakistan-Kuwait Investment Company, “the lower trade deficit has supported the current account balance.” A $1.5 billion loss was seen in the same month previous year.
The current account surplus was more than expected, according to the head of research at Ismail Iqbal Securities, Fahad Rauf. He stated that the $2.1 billion trade deficit recorded by the Pakistan Bureau of Statistics was incorrect, and that the actual deficit was $1.2 billion. The PBS numbers were off, although “both exports and remittances were better than the PBS numbers.”
He also noted that “the increase in the surplus month over month was mainly due to higher goods exports,” which increased to $2.6 billion in May from $2.1 billion in April. Imports increased by 3% month-over-month in April, reaching $3.8 billion. In April, imports were down 33% from the previous year.
Pakistan’s current account has seen serious fluctuations
In the first eleven months of the current fiscal year, remittances decreased by 13%, to $24.8 billion. May’s $2.1 billion inflows were 10.4 percent lower than May 2017. Remittances fell by 4.4% over the previous month.
For the first 11 months (July–May) of the current fiscal year, the deficit in the country’s current account was $2.9 billion, down 81% from the deficit of $15.2 billion in the same time last year. While the current account surplus is encouraging, the total balance of payments situation remains dangerous due to low foreign exchange reserves of $4 billion. This is only enough to fund imports for one month.
A increasing likelihood exists that the International Monetary Fund (IMF) could decide against delivering long-awaited assistance before its bailout programme expires at the end of June due to the IMF’s criticism of Pakistan’s latest budget. For the fiscal year’s first half, which begins in July, this would mean a severe lack of funds.
The government has accumulated $4 billion in foreign exchange reserves at the present time. With at least $900 million in debt due this month, these reserves will decrease by the end of June without help from the IMF.
Between July and December, Pakistan is responsible for making additional repayments totaling $4 billion (which cannot be carried over). Default is quite probable by the start of the fiscal year in 2024, as foreign exchange reserves are expected to drop below $4 billion by then. Without an IMF programme, it is likely that the alternatives for new external funding would be severely constrained.
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