Business

C/A achieves surplus for 2nd month in a row

Surplus signals external stability, but import controls impact industrial output

Our Correspondent March 20, 2024

A report of finance ministry showed that in the next fiscal year too, the government would not have a primary budget surplus and instead it may register a minimum 0.2% deficit. photo: file

KARACHI:

Pakistan’s current account balance posted a surplus for the second consecutive month in Fiscal Year 2024 (FY24), reaching $128 million in February. While this reduces external pressure on the economy, it comes at the expense of industrial activities.

The surplus is attributed to several factors, including reduced repatriation of profits by foreign companies, lower spending on technology and Information Technology (IT) imports, and relatively fewer payments for foreign services such as airlines.

According to the State Bank of Pakistan’s (SBP) data, the balance was in deficit at $303 million in January 2024 and $50 million in February 2023. Consequently, the cumulative current account deficit for the first eight months (Jul-Feb) of the fiscal year 2023-24 fell to below $1 billion ($999 million), compared to $3.85 billion in the same period last year, marking a significant 74% reduction.

Read: ‘Fixing current account key to GDP growth’

Topline Securities, CEO, Muhammad Sohail noted that Pakistan has achieved a current account surplus exceeding $600 million in the past 12 months (from March 2023 to February 2024). He attributed this surplus to measures such as currency devaluation, higher interest rates, and other policy steps that effectively curbed import demand.

Looking ahead, he stressed the importance for the new government to maintain this disciplined approach to ensure much-needed economic stability. He stated, “Continued adherence to such measures will be essential for sustaining and further improving Pakistan’s economic outlook.”

However, controlled imports have adversely affected industrial output, slowing overall economic activities in FY24. Goods imports decreased by 6% to $4.27 billion in February compared to $4.55 billion in January 2024. Similarly, goods exports slowed by 5% to $2.56 billion in the month compared to $2.70 billion in the prior month. Additionally, workers’ remittances decreased by 6% to $2.25 billion in February.

Published in The Express Tribune, March 20^th, 2024.

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