Pakistan Records $654 Million Current Account Surplus in March Following Import Restrictions and Remittance Surge
Pakistan’s current account recorded a surplus of $654 million in March, driven by import restrictions and increased remittances ahead of the religious festival Eid ul Fitr. This marks the first surplus since November 2020 and the highest since February 2015, according to data from the State Bank of Pakistan (SBP) released on Wednesday.
In February, the current account deficit, representing a country’s expenditures and income difference, stood at $74 million. However, between July and March of the current fiscal year, the deficit was $3.4 billion, a 74.1% decrease compared to the same period in 2022.
The measures to reduce the deficit, including import restrictions, have slowed economic growth. Nevertheless, he acknowledged the surplus as a “significant” development, attributing it to a remittance increase during Ramadan, totaling $2.5 billion, and ongoing import restrictions.
The prolonged import restrictions as a short-term measure have negatively impacted economic growth and increased unemployment. State Bank data showed a 34.7% year-on-year decrease in imports in March, reaching $4 billion, while exports fell by 21% to $2.4 billion. Remittances also experienced a 10.7% YoY decline, amounting to $2.5 billion in March.
Import restrictions on essential items were implemented as foreign exchange reserves reached a critical low last year. However, despite some easing, companies across various sectors reported difficulties opening letters of credit (LCs) with banks. This has led to temporary shutdowns in industries like automotive manufacturing due to inventory shortages.
International institutions, such as the International Monetary Fund (IMF), World Bank, and Asian Development Bank, have reduced Pakistan’s growth projections from 0.4% to 0.6% for this fiscal year.
The government is to finalize an agreement with the IMF, which would release over $1 billion to help avert the risk of default and encourage further inflows from other international lenders.
Addressing the dollar liquidity crunch is also crucial for the government, as the central bank’s reserves currently stand at $4 billion, insufficient to cover a month’s worth of imports.
