Current Account Deficit Falls to $50 Million in February 2021

The current account maintained an improving trend in February 2021 as the deficit narrowed down to $50 million from the previous levels of $210 million in January 2021 and $652 million in December 2020.

The staggering reduction in the deficit was supported primarily by the sustainable high inflows from the exports and remittances that had remained above $2 billion in the outgoing month of February, which significantly offset the ballooning bill for the imports.


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According to the State Bank of Pakistan (SBP), the overall current account maintained a surplus level of $881 million during July 2020 and February 2021, backed by the initial months of the financial year that continued to add surplus values to the trade and current accounts.

 

Conversely, the current account recorded a huge deficit of $2.74 billion in July-February of the previous financial year, showing a very encouraging sign for the economy.

The SBP remarked that the surplus in the current account has been helped by continued strong growth in the workers’ remittances and a sustained recovery in exports since November 2020 in year-on-year terms, which more than offset the increase in the imports due to the shortages of domestic food and recovering economic activity.


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On the one hand, the trade balance of goods and services showed a deficit of 12 percent or $1.9 billion to stand at $17.42 billion between July 2020 and February 2021. On the other hand, the remittances continued to show sustainable growth that recorded an increase of $3.6 billion from the last financial year to reach $18.7 billion during the period.

As the economy is set to recover and the GDP could grow by three percent as per the SBP’s latest forecast, the import bill is expected to grow further while the exports and remittances are likely to show sustainability which will ultimately result in a surplus level of the current account in the remaining months of the financial year.

However, as the third wave of the coronavirus pandemic is gripping various countries, the economy might follow a different trend than that of the present, depending on the performance and the resilience of the economic recovery and sustainability of the country.



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