Pakistan negligible C/A deficit in February

As per SBP data, Pakistan’s current account balance in February 2021 is a deficit of US$50mn, compared with a deficit of US$210mn in the previous month (down 75% yoy). This takes the C/A balance in 8MFY21 to a surplus of US$0.88bn – a sharp improvement from a deficit of US$2.7bn same period last year. Broadly, the current account and most of its constituents have replicated the previous month’s performance, except for a decline in the Primary Income balance (down 40% or by c.US$150mn mom), indicating less interest payments related to foreign debt.

Goods trade deficit in February 2021 is largely unchanged mom at US$2.3bn. Imports rose marginally to US$4.5bn from US$4.4bn in the previous month (SBP data). Much of the normalization of imports took place in January (from c.US$5.0bn in Dec 2020) with more normal levels of wheat and sugar imports (which have declined further in February). As per PBS data, Food imports came in at c.US$0.7bn (down 4% mom but up 10% yoy). Machinery imports held steady at US$0.9bn (albeit up 26% yoy), while Petroleum imports fell 7% mom to US$0.8bn (despite c.17% mom higher international crude oil prices). The latter could be because of optimum utilization of domestic refineries (amid better consumption of furnace oil) and in turn higher production of retail fuels (less imports thereof). Total goods imports during 8MFY21 clocked in at US$32.1bn, up 8% yoy.

Exports in February are nearly flat at US$2.1bn (up 3% mom). As per PBS data, Textile exports fell 7% mom to US$1.2bn – second consecutive monthly decline due to seasonal factors, in our view. Similar trend is seen in non-textile exports. While all major textile items showed sequential decline, that of Knitwear (including home textiles) rose 13% yoy. Total goods exports during 8MFY21 are down 2% yoy at US$16.0bn.

Remittances in February stood at US$2.2bn, compared to c.US$2.3bn monthly average since June 2021. Total remittances in 8MFY21 are up 24% yoy to US$18.7bn. A recent impetus for remittances has been the inflows from non-resident Pakistanis into Roshan digital accounts (launched recently by the SBP following the outset of Covid-19 pandemic), which have reportedly crossed c.US$670mn in only six months. Following the recent monetary policy, the SBP guided that remittances should remain healthy due to potential economic rebound in the GCC (higher oil prices) and net outflow of workers in recent months.

SBP’s Fx reserves almost sustain US$13.0bn level

SBP’s forex reserves were marginally lower than US$13.0bn by the end of February 2021. The imminent resumption of IMF program bodes well for reserves buildup in the coming months and maintaining the import cover at a healthy level of over three months, in our view. PKR has appreciated c.2.5% against the USD CY21td.

Courtesy –  Intermarket Securities Limited. 


 

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