The first month of the current financial year came with good news for the economy as the current account deficit recorded a huge surplus of $424 million in July with the other macroeconomic indicators such as remittances showing healthy growth.
According to the State Bank of Pakistan (SBP), the trade deficit of goods and services declined by 12 percent to stand at $2.098 billion in July as compared to $2.388 billion recorded in the same month of last financial year.
Prime Minister Imran Khan said that the country’s economy is on the “right track” after Pakistan’s current account balance, according to him, showed a surplus of $424 million for July.
MashaAllah Pakistan's economy is on the right track. After current account balance posted deficit of $613 mn in July 2019 & a deficit of $100 mn in June 2020, in July 2020 current account balance swung upwards to a surplus of $424 mn.
— Imran Khan (@ImranKhanPTI) August 24, 2020
The premier credited the “strong turnaround” to the continuing recovery in exports, which he said rose by 20% compared to June 2020 and a record increase in remittances.
A.A.H Soomro, managing director at Khadim Ali Shah Bukhari Securities told ProPakistani,
It’s a one-off owing to increase remittances that should slow down. And low imports, that ought to increase in low-interest rates. Nonetheless, the currency remains solid and gives confidence to investors
The import of goods fell to $3.6 billion from $4.1 billion and the import of services also decreased to $798 million from $880 million in July. The reduction of imports also supported the balance of payments of the country, limiting the deficit.
Remittance inflows, on the other hand, reached an all-time high level of $2.7 billion in a single month, which ultimately turned the current account into surplus.
Meanwhile, the export of goods stood at $1.8 billion and services stood at $436 million in July. The exports declined on a year-o-year basis however they recorded a slight increase on a month-to-month basis as the economic activities are being restored globally and locally.
It is expected that imports and exports of goods and services may witness a gradual growth in months to come, though the government should focus to contain the import bill and enhance exports along with remittances to maintain the positive trend of current account surplus, which is indeed a herculean task.
Besides the current account, foreign investment inflows were over $100 million and revenue collection of Rs. 300 billion was carried out which was also above the target. All such indicators are good for the economy which should be persistent.