Despite all you’ve heard about the economy recently, it isn’t doing so bad right now. The country reported an optimistic development as the current account reported an increase of $13 million in May 2020.
This is the second surplus reported in recent months. Previously, the current account reported a surplus of $99 million in October 2019 after a gap of four and a half years.
The surplus was due to lower imports compared with higher remittance inflows coupled with export receipts that reported a reduction in value which was much lower than expected by the economic managers.
According to the State Bank of Pakistan (SBP), the current account showed a surplus of $13 million in May. It reported a comparatively huge deficit of $530 million in April and stood at over $1 billion in the same month of last year.
A.A.H Soomro, managing director at Khadim Ali Shah Bukhari Securities told ProPakistani,
Currency should stabilise now near Rs. 165s. Reduction is more import driven. As consumption increases, don’t expect surpluses. It’s a breather for the government coupled with ADB, IMF and WB inflows.
In May 2020, the balance of trade for commodities and services saw a decline of $ 1.612 billion whereas remittance inflows surpassed its value to stand at $1.87 billion which reflected the surplus position of the current account.
From July to May, the current account reported a deficit of $3.28 billion as compared to a deficit of $12.4 billion in the same period last fiscal year, showing a significant difference of 73% or $9.1 billion.
The overall balance of trade for commodities and services fell by 31% or $9.3 billion during the eleventh month of the ending financial year. During the period, exports of commodities and services stood at $20.5 billion and over $5 billion, on the other hand, the import bills of commodities and services stood at $38.8 billion and $7.7 billion respectively.
Remittance inflows stood at $20.6 billion in the period which provided major support to the current account’s position despite the lockdown in different countries.
Improving remittances and exports in the earlier months of the current financial year and then subsequent lowering of the import bill followed by oil expenses in later months contained the imbalance of payment.
As businesses are reopening throughout the world and Pakistan, the expenses under imports are likely to go up in the coming weeks, on the other hand, the export earnings might show a little growth along with remittance inflows.
The present government announced a support package earlier for businesses and industries and devised an incentivized policy to deviate remittances from informal to banking channels.