PTBP Web Desk
Pakistan has recorded a significant current account surplus of $75 million in August 2024, according to the latest data released by the State Bank of Pakistan (SBP).
This marks a notable improvement compared to August 2023, when the country experienced a current account deficit of $161 million. The positive shift in the current account balance is being attributed largely to a substantial increase in remittances, which surged by 40%.
In the first two months of the fiscal year (July and August), Pakistan’s current account deficit stood at $171 million. This is a remarkable improvement when compared to the $939 million deficit recorded during the same period in the previous fiscal year. The turnaround indicates a significant boost in Pakistan’s external financial position, a development that has been welcomed by economists and market analysts alike.
The primary factor driving this current account surplus has been the considerable rise in remittances. Pakistan received an impressive $2.9 billion in remittances in August 2024 alone. These inflows have played a pivotal role in strengthening the country’s foreign exchange reserves and stabilizing the current account. Economists suggest that the increased inflows could be due to multiple factors, including the use of formal channels for remittance transfers and favorable conditions in the global job market for Pakistani expatriates.
The current account surplus is also influenced by the country’s trade performance. In July 2024, Pakistan’s total exports rose by 11.3% year-on-year (YoY) to $3.01 billion, compared to $2.71 billion in the same month last year. Although there was a slight decline of 2.2% from the previous month’s exports of $3.08 billion, the overall year-on-year growth remains a positive indicator.
On the import side, total imports increased by 12.2% YoY to $5.6 billion in July 2024, as compared to $4.99 billion in July 2023. However, imports saw a minor decrease of 1.3% when compared to the previous month. This slight reduction in month-on-month imports has contributed to narrowing the trade deficit, further aiding the current account balance.
The improvement in the current account balance is a promising sign for Pakistan’s economy, which has been facing challenges in recent years. A surplus helps in reducing the pressure on foreign exchange reserves and provides more stability to the exchange rate. It also reduces the need for external borrowing, thus lowering the debt burden on the economy.
The surge in remittances, which has been a significant contributor to this surplus, highlights the importance of overseas Pakistanis in the country’s economy. With the global economy gradually recovering from the impacts of the pandemic, remittances are expected to remain a vital source of foreign exchange for Pakistan.
While the current account surplus is a positive development, maintaining this trend will require continued efforts to boost exports and manage imports effectively. The government and the SBP are expected to implement policies aimed at promoting export-oriented industries and curbing non-essential imports. Furthermore, there is a need to continue encouraging the use of formal channels for remittance transfers to sustain the inflow of foreign exchange.
The increase in exports is a favorable sign for the country’s trade balance. However, to ensure long-term sustainability, Pakistan must focus on enhancing the competitiveness of its export sector. This includes diversifying the export base, improving product quality, and exploring new international markets.
