KARACHI: Pakistan Current Account (C/A) clocked in a surplus of $73 million in Sept-2020 compared to a surplus of $211 million in August 2020. The State Bank of Pakistan (SBP) said that it was the first quarterly surplus after five years.
Prime Minister Imran Khan on Wednesday said in a tweet that the country is heading in the “right direction” as Pakistan’s current account recorded a surplus of $792 million in the first quarter of the ongoing fiscal year 2020-21, with the central bank saying that it is the “first quarterly surplus in more than five years”.
He said, “the current account was in surplus of $73 million during September, bringing in a surplus for the first quarter to $792 million. He explained that the country had registered a deficit of $1,492 million during the same quarter of the previous year.
“In September, the current account posted a surplus for a third successive month. The surplus reached $73 million against a deficit of $278 million a year earlier,” said the SBP in a series of tweets.
It added that “the current account recorded a surplus of $792 million in Q1-FY21, the first quarterly surplus in more than 5 years”.
The SBP also shared that the continued buoyancy in remittances is up by 9% on a month on month basis. It added that the broad-based rebound in exports increased by 29% on a month on month basis which led to the current account surplus in September.
This was the third consecutive month that Pakistan’s Current Account has recorded a surplus, taking first quarter of fiscal year 2020-21 surplus to $792 million compared to fourth quarter 2019-20 deficit of $286 million.
The September 2020 C/A balance came in better-than-expected, where largely a deficit was expected based on earlier released numbers by Pakistan Bureau of Statistics (PBS) on Trade Balance (SBP -$140 million MoM, PBS: -$700 million MoM for Sept-2020). The discrepancy exists because SBP relies on receipts and payments of foreign exchange to compile its data while PBS monitors physical movement of goods. The impact of this may reflect in Oct-2020 C/A balance.
In Sept-2020, Balance on Trade in Goods deteriorated by $140 million (-8% MoM) on the back of increase in Imports of Goods by $581 million (+18% MoM), whereas Exports of Goods improved by $441 million (+29% MoM).
The Balance on Primary Income also deteriorated by $197 million (-61% MoM), however increase in Remittances by $189 million (+9% MoM) cushioned its impact.
The C/A witnessed a marked improvement in 1QFY21 vs. its preceding quarter (affected by COVID-19) on the back of $1.0 billion (+17% QoQ) higher Remittances.
Export of Goods improved by 26% QoQ whereas Imports of Goods increased by 12% QoQ – both offsetting each other in absolute terms.
The C/A surplus clocked in at 1.2% of GDP in first quarter 2020-21 compared to C/A deficits of 0.4% of GDP in fourth quarter 2019-20 and 2.3% in first quarter 2020-21.
The Financial Account recorded a deficit of $510 million in Sept-2020 due to repayment of loans. Foreign Direct Investment (FDI) remained muted at $189 million, however up 200% MoM.
Hence, overall Balance of Payment recorded a deficit of $423 million in Sept-2020 with SBP reserves closing Sept-2020 at $12.2 billion from Aug-2020 closing of $12.7 billion. The latest SBP reserves stand at US$11.8 billion.
The analyst of Topline brokerage house said, “we expect the CA deficit to clock in at $2.5-3.0 billion in 2020-21 (1.0-1.2% of GDP) as COVID-19 related lockdowns and restrictions ease globally and international oil prices also trend up.”