In a positive development for Pakistan’s economy, the current account recorded a surplus for the second consecutive month in April. The surplus amounted to $18 million, a significant improvement compared to the $640 million deficit recorded in the same period last year, according to data released by the State Bank of Pakistan (SBP).
This follows the previous month’s surplus in March, which marked the first time the current account had been in surplus since November 2020, reaching $654 million—the highest level since February 2015.
The surplus in April, although lower than anticipated, can be attributed to the State Bank of Pakistan’s clearance of a backlog of imports, as explained by Tahir Abbas, Head of Research at Arif Habib Limited. However, despite the recent positive trend, the reduction in the current account deficit through import curtailment is seen as unsustainable.
Over the ten months of the current fiscal year, the current account deficit has reached $3.25 billion, representing a 76% decline compared to the same period last year when it stood at $13.65 billion.
Data from the SBP reveals a 38% year-on-year decrease in the import of goods, amounting to $3.7 billion in April. Similarly, exports fell by 33% to $2.11 billion, while remittances experienced a decline of 29%, totaling $2.2 billion.
Dr. Khaqan Najeeb, a former finance ministry advisor, acknowledged the importance of reducing the current account deficit by limiting imports but stressed that this approach was not sustainable. He emphasized the need to enhance the economy’s productive capacity and develop the export sector to achieve long-term stability.
Dr. Najeeb further highlighted the low export-to-GDP ratio, currently at 10%, as a major concern rather than the relatively higher import-to-GDP ratio. He also emphasized the importance of maintaining remittances by ensuring a stable exchange rate, as this contributes to meeting the country’s current account requirements.
While the surplus in the current account is a positive sign, Pakistan’s foreign exchange reserves remain critically low at $4.38 billion as of May 5, insufficient to cover even a month’s worth of imports. As a result, the government is urgently seeking to revive a crucial loan program with the International Monetary Fund (IMF) to prevent a potential default.
Amidst this challenging economic situation, international institutions, including the IMF, World Bank, and Asian Development Bank, have revised their growth forecasts for Pakistan. They project the economy to grow between 0.4% and 0.6% in the current fiscal year.
Pakistan’s current account surplus for the second consecutive month provides temporary respite. However, sustainable economic growth requires addressing the country’s structural issues, boosting exports, and expanding the productive capacity of the economy. Securing the IMF loan program and replenishing foreign exchange reserves are crucial steps toward achieving long-term stability.