SBP says CAD dropped 64% or $1.6b in first five months of FY24
Pakistan’s balance of current account recorded a surplus of $9 million in November 2023 after remaining in deficit in the first four months (July-October) of the current fiscal year 2023-24, suggesting that the country’s capacity to make international payments has improved in recent times.
State Bank of Pakistan (SBP) reported on Monday the current account deficit (CAD) has cumulatively dropped by 64% or $1.16 billion in the first five months of FY24 compared to $3.24 billion in the same five months of the last year.
While talking to The Express Tribune, Akseer Research Director Mohammad Awais Ashraf said that the country has witnessed the balance of current account in surplus mainly due to improvement in the export of technology, export of government services, low-interest payment and comparatively low repatriation of profit by foreign companies from Pakistan to their head offices abroad in November 2023 compared to October 2023.
Ashraf stated that the export of technology witnessed a nearly 9% rise to $259 million in November compared to $238 million in October. Additionally, other business services saw a growth of almost 10%, reaching $137 million compared to $125 million.
The import of services decreased by 1.5% to $831 million compared to $844 million in the prior month, extending its support to turn around the balance of the current account into surplus in November.
On the other hand, however, the import of goods ticked up to $4.46 billion in the month compared to $4.38 billion in the prior month and the export of goods ticked down to $2.73 billion compared to $2.76 billion on a month-on-month basis, suggesting the trade deficit of goods has slightly widened in November.
Despite these positive trends, the inflow of worker’s remittances decreased by 9% on a month-on-month basis, falling to $2.25 billion in November compared to $2.46 billion in October, which weakened its contribution to the overall current account balance for the month.
Ashraf also highlighted two key challenges for the government. First, maintaining the import of goods and services at a lower level to keep the current account deficit manageable, especially as the economy is expected to expand in the coming months. Second, ensuring the stability of the rupee amid potential pressure from increased demand for dollars due to an uptick in imports.
He further said that the higher debt repayment obligation and low foreign exchange reserve would make the government maintain imports on the lower side to avoid widening of the current account deficit in the remaining seven months of FY24.
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