Pakistan’s current account balance almost reached breakeven with a nominal deficit of $8 million for September 2023, slightly missing market expectations of a surplus.

According to State Bank of Pakistan’s (SBP) data, the current account deficit of $8 million was 95% lower than the deficit of $164 million in August and 98% lower compared to the gap of $360 million in September last year.

Overall, in the first three months (Jul-Sept) of current fiscal year 2023-24, the current account deficit reached $947 million, down 58% against the deficit of $2.26 billion in the same period of last year.

According to Arif Habib Limited, a notable reduction of 19% in imports that hit $3.98 billion in September and 11% increase in workers’ remittances to $2.20 billion played a pivotal role in narrowing of the current account gap. Export earnings remained almost flat.

Topline Research reported that the market was expecting a current account surplus in September 2023.

The low imports, however, continued to choke supplies of imported raw material to a large number of industrial units, crippling their production activities and forcing many to opt for production holidays.

The revival of imports amid low foreign exchange reserves and foreign investment and financing remain a big challenge for the country.

The government has technically removed all restrictions on imports since the beginning of the current fiscal year in July. It has adopted a strategy to keep the quantum of imports equivalent to the sum of export earnings and workers’ remittances.

This strategy has been devised to avoid draining out foreign exchange reserves, avert overheating of the economy, keep current account deficit at nominal levels and improve balance of payments as expected financing from multilateral and bilateral creditors has not yet arrived.

The low imports, however, have put millions of jobs at stake. Any prolonging of the situation may increase the unemployment rate, which is already close to 10% and pushing millions of households below the poverty line, it has been learnt.

Experts projected that Pakistan’s economy may stabilise in the second half (Jan-Jun) of current fiscal year ahead of the receipt of investment from Saudi Arabia and African investors in Reko Diq and through the sale of state-owned entities including RLNG-based power plants and Pakistan International Airlines (PIA).

Central bank data suggests imports of goods fell 24% to $12.46 billion in the first quarter of FY24 compared to $16.35 billion in the same period of last year.

Workers’ remittances dropped 20% to $6.33 billion in the quarter compared to $7.89 billion in the same period of last year.

Exports of goods dipped 5% to $7.02 billion in the first three months compared to $7.38 billion in the corresponding period of last year.

Published in The Express Tribune, October 20^th, 2023.

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