Current account posts $75m surplus in August

Following the sharp decline in the first two months of the fiscal year 2024-25, the current account returned to a surplus of $75 million in August 2024.

The growth was attributed to the strong inflows from foreign remittances and a rise in IT exports.

According to the State Bank of Pakistan (SBP), a significant shift was seen after a decline in three consecutive months of deficit.

The surplus has helped the cash-strapped country to reduce the cumulative deficit of the two months (July-August) of the fiscal year 2024-25 to $171 million, an 81% reduction compared to $893 million in the same period of the previous year.

The development came after a surge in remittances of overseas Pakistanis, which increased by 40 percent to $2.94 billion in August 2024, compared to $2.09 billion in August 2023.

Similarly, IT exports also witnessed a 27 percent increase, reaching $298 million during the month. However, the overall exports of Pakistan declined to $620 million from $663 million last year. 

Tahir Abbas, head of research at Arif Habib Limited, believed that the surplus could be larger, but the import payments for the textile, metal, machinery, and petroleum products led to the amount of the current account short surplus.

Additionally, the significant decline in global oil prices helped Pakistan in all sectors by providing support to maintain a favourable current account balance.

Abbas said the government is expecting to keep the current account deficit for FY25 up to $3.5 billion, 0-1 percent of GDP, with support of overseas’ remittances and IT exports.

He added that recent data on migration showed the number of Pakistanis migrated to foreign countries to find space in the overseas job market, which will boost remittance inflow as they send funds home to support their families.

Large payments of $1 billion in an account of import bills prevented the current account from being recovered in June and July.