Pakistan has witnessed a remarkable turnaround in its current account balance, with the latest data from the State Bank of Pakistan (SBP) revealing a surplus of $619 million. This positive development can largely be attributed to a substantial increase in workers’ remittances, marking a significant shift in the country’s economic landscape.
The recent figures indicate a notable improvement compared to previous months. In March 2023, Pakistan recorded a current account surplus of $98 million, which has now surged to $619 million, showcasing a steady upward trajectory in economic performance.
On a cumulative basis for the first nine months of the fiscal year 2024 (9MFY24), the current account deficit stood at $508 million, marking an impressive 87.5% year-on-year improvement compared to the deficit of $4.05 billion recorded in the same period of the previous fiscal year.
The data also highlights positive trends in trade. Total exports registered a 4.6% year-on-year increase to $3.23 billion, while imports saw a 7.9% year-on-year rise to $5.25 billion. However, the trade deficit in goods and services widened by 13.7% year-on-year to $2.02 billion, indicating persistent challenges in maintaining a balanced trade position.
Breaking down the trade data, the trade deficit in goods reached $1.93 billion, reflecting an 11.2% year-on-year increase. Meanwhile, the trade deficit in services expanded to $89 million, up 128.2% year-on-year, underlining the importance of addressing structural issues in both sectors.
One of the driving factors behind Pakistan’s improved current account balance is the surge in workers’ remittances. In March, remittances increased by 16.4% year-on-year to $2.95 billion, contributing significantly to the overall surplus. Cumulatively, for the first nine months of FY24, workers’ remittances stood at $21.04 billion, representing a modest 0.9% year-on-year rise.
These encouraging economic indicators underscore Pakistan’s resilience and potential for sustainable growth. However, policymakers must remain vigilant and implement measures to address trade imbalances and promote export-led growth to ensure long-term economic stability and prosperity.
PAKISTAN’S SERVICE SECTOR TRADE DEFICIT WIDENS, EXPORTS SHOW RESILIENCE
The latest data released by the State Bank of Pakistan (SBP) highlights a notable increase in Pakistan’s service sector trade deficit, which stood at $89 million in March. This represents a significant surge of 2.28 times year-on-year compared to the deficit of $39 million recorded in the same period last year. Additionally, the deficit widened compared to the previous month’s figure of $79 million.
Despite the widening deficit, there are positive indicators within the service sector. Exports of services in March saw a promising increase of 6.76% year-on-year, reaching $711 million compared to $666 million in March 2023. This growth trend is also reflected on a monthly basis, with exports rising by 13.04% compared to February 2024.
However, on a cumulative basis for the first nine months of the fiscal year 2024 (9MFY24), services exports experienced a slight decline of 0.09% year-on-year, totaling $5.808 billion compared to $5.813 billion in the same period of the previous fiscal year.
Among the various service sectors, Telecommunications, Computer, and Information Services emerged as the largest contributor to exports in March, totaling $306 million and witnessing a substantial increase of 36% year-on-year.
Other Business Services also made a significant contribution, bringing in $147 million into the country. This category experienced robust growth of 14.84% year-on-year and 21.49% month-on-month.
In terms of imports, the data reveals a year-on-year increase of 13.48%, with imports amounting to $800 million in March compared to $705 million in the same period last year. Monthly imports also saw an uptick compared to the previous month, reaching $708 million.
For the cumulative period of 9MFY24, imports stood at $7.463 billion, marking a substantial year-on-year increase of 20.62% compared to the same period in the previous fiscal year.
Transport accounted for the largest expenditure among imports, totaling $330 million, albeit witnessing a year-on-year decrease of 18.75%. Meanwhile, Travel services incurred costs of $224 million, reflecting a significant increase of 2.02 times year-on-year and 35.76% month-on-month.
The data suggests a mixed performance within Pakistan’s service sector, with challenges in narrowing the trade deficit while certain segments show resilience and growth potential. Policymakers may need to focus on strategies to enhance competitiveness and promote exports in key service sectors to address the trade imbalance effectively.
