The country’s current account posted a surplus of $334 million in June 2023, significantly higher than the surplus of $225 million posted in May 2023.
According to data released by the State Bank of Pakistan (SBP), cumulatively the current account deficit (CAD) reduced to $2.56 billion in July-June FY23, down by 85.3 percent year-on-year against a deficit of $17.48 billion in July-June FY22.
This is the fourth consecutive month that the current account posted a surplus; the country has achieved the surplus after a host of import restriction measures.
Current Account recorded a surplus of $334 million in Jun 2023.https://t.co/Od8ikVvXrd#SBPBOP pic.twitter.com/llVGIKiKNa
— SBP (@StateBank_Pak) July 18, 2023
In March, the country’s current account posted a surplus for the first time since November 2020. During FY22, Pakistan’s current account deficit stood at $17.481 billion.
A current account surplus occurs when foreign income exceeds expenditure.
Last fiscal year’s restrictions on letters of credit (LCs) spread to all industries after the government decided to halt trade in exchange for a current account surplus.
CEO of Alpha Beta Core Securities, Khurram Schehzad told ProPakistani,
CAD stood at 0.7% of GDP in FY23 vs a 4.7% deficit in FY22.
Import restrictions helped contained the external deficits, however, played heavily on the domestic economy, in terms of the massive decline in manufacturing, slowing down businesses and industries, affecting investment, employment, and inflation.
FY23 was choosing between growth and stability given the precarious situation and acute availability of foreign exchange.
In the new fiscal year (2023-24), the government has lifted all restrictions on credit letters, which may push the current account back into deficit.
This is very likely as the country now prepares to reboot industrial operations and will import raw materials in bulk, which will push fiscal expenditure above foreign income in the coming cycles, essentially keeping CAD in the red unless income exceeds expenditure as a result.
