Pakistan has seen a notable upturn in its current account balance, with a surplus of $619 million recorded in March 2024, according to the State Bank of Pakistan (SBP). This marks a significant improvement compared to previous fiscal years, with the cumulative deficit for July to March FY24 standing at just $0.5 billion, down from $4.1 billion during the same period in FY23.
The figures released by the SBP highlight a decrease in the merchandise trade deficit, which amounted to $15.8 billion from July to March in FY24, compared to $21.08 billion in the corresponding period of the previous fiscal year. Similarly, the services trade deficit narrowed to $1.655 billion during the same period in FY23-24, contrasting with a deficit of $374 million in FY23.
Overall, the trade deficit in goods and services for the current fiscal year totaled $17.412 billion, a notable improvement from $21.453 billion in the previous year. However, the balance on primary income stood at a negative $5.561 billion, down from $4 billion last year, according to SBP data.
The Ministry of Finance had anticipated this positive trend, projecting a sustainable current account balance for March. Data for February 2024 revealed a surplus of $128 million, a stark contrast from the $303 million deficit recorded in January 2024. This improvement was primarily driven by a 14.2% decline in the trade deficit in goods and services on a month-on-month basis, coupled with a 36% improvement in the balance on primary income due to lower debit.
Despite a 6.2% decrease in remittances, which typically play a significant role in current account improvement, it is expected that exports of goods and services will rise to approximately $3.5 billion in March 2024, driven by favorable foreign demand. Imports are projected to reach around $5.5 billion, while remittances are anticipated to improve due to seasonal factors like Ramadan and Eid.
Taking into account these factors and various components, it is forecasted that the current account will remain within sustainable limits in the coming months.
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