Current account records $748m surplus in 10 months

Strong exports, record remittances keep the account in the black.

KARACHI:

The current account of the government posted a surplus of $748 million in the first 10 months of the fiscal year 2011, supported by a strong growth in exports and inflow of a record volume of remittances, data shows.

Last year, the current account recorded a deficit of $3.46 billion in the 10-month period, according to figures released by the State Bank of Pakistan on Tuesday. In April alone, the surplus stood at an encouraging $716 million.

The country’s exports stood at more than $2 billion each over the last three months, taking the total figure to $20.53 billion for July-April 2010-11 compared to $16.17 billion in the corresponding period last year. “Better cotton, yarn and textile exports due to attractive prices in the international market have been the key driver behind the strong growth in overall exports,” said Hamad Aslam, Group Head of Equities at BMA Capital.

The government is now anticipating that exports will reach a record $24 billion at the end of the current fiscal in June compared to around $19 billion worth of exports last year.

However, cotton prices have dropped sharply over the past few weeks, leading to closure of some factories in the country due to inventory losses. This may also threaten the expected level of exports as the drop in cotton prices has brought down textile prices in the international market.

“Importers are now asking for supplies of textile products at reduced prices, which will cause losses to the exporters, who had purchased the raw material at higher prices earlier,” said an industry official.

“The other factor that has kept the current account in surplus is the record high remittances sent home by overseas Pakistanis. Expatriate Pakistani workers living in the Middle East are sending more money back home in the wake of concerns caused by the political turmoil in the Middle East and North Africa region,” Aslam said.

Remittances have soared 24 per cent to $9.05 billion in 10 months (July-April) of the current fiscal year compared to $7.31 billion in the same period last year. Swift transfer of money through legal channels, crackdown on the illegal Hundi and Hawala systems and flow of charity money after floods last year were the other factors that drove remittances to such highs.

According to the current account data, current transfers also increased to $12.91 billion in the July-April period compared to $10.46 billion in the same period last year.

Published in The Express Tribune, May 18^th, 2011.