Pakistan’s current account (CA) balance in September 2024 was a second consecutive surplus of US$119mn, up from US$29mn in August 2024. The sequential improvement came mainly from a decline in the goods and services trade deficit, which in turn was due to higher exports. The CA balance during 1QFY25 thus stood at a meagre deficit of US$98mn, compared with a deficit of US$1.2bn in the same period last year.
As per PBS data, goods trade deficit in September was c.US$1.8bn, about 10% lower than the average deficit of c.US$2.0bn in the previous 11 months. Goods exports rose c.3% MoM to c.US$2.7bn, majorly due to higher food exports (up 13% MoM, broad-based), while Textile exports were flat MoM. Goods imports rose 4% MoM to US$4.7bn, as per PBS data; the moderate increase came majorly from higher machinery and steel imports. In the coming months, goods trade deficit could expand, as (i) Textile/rice exports will further moderate (decline of winter shipments by textile exporters and resumption of rice exports from India), and (ii) imports could rise amid sharply falling interest rates.
Remittances in September fell marginally by 3% MoM at US$2.8bn; though they remained at a healthy level (up 29% YoY). Major decline was seen in flows from the US and UK, while that from the GCC held up sequentially (too early to see any pressure from declining oil prices and geopolitical tensions).
Forex reserves surge to the highest level since April 2022
SBP’s Forex reserves rose to US$11.0bn by mid-October, thanks to the release of first tranche of IMF EFF program by early October (immediately after the BoD approval). This should pave the way for further external inflows from bilateral and other multilateral sources in the coming months, while the program itself is pushing for the start of privatization of SOEs during FY25 (some transactions have interest from GCC based investors).
Courtesy – IMS Research
