Pakistan's Current Account Surplus Reaches Nine-Year High

Pakistan's current account has shown a significant improvement, recording a surplus of $619 million in March 2024, marking the highest monthly surplus in nine years. This surge is a stark contrast to the deficit of $508 million during the first nine months of the fiscal year, which is 87% lower than the previous year's figure of $4.05 billion.

The surplus has been attributed to a rise in remittances during the Ramadan/Eid season and a decrease in the trade deficit. Additionally, factors such as a high-interest rate and import restrictions have contributed to narrowing the current account deficit, aligning with policymakers' objectives.

In March 2024, Pakistan's exports totaled $3.23 billion, while imports amounted to $5.249 billion. Despite exports reaching over $28.8 billion in the first nine months of the fiscal year, imports surged to $46.2 billion during the same period.

The State Bank of Pakistan anticipates that the current account deficit will remain within the forecast range of 0.5 to 1.5% of GDP for FY24, bolstering foreign exchange reserves. The current account balance is crucial for Pakistan, a country heavily reliant on imports, as a widening deficit can strain the exchange rate and deplete foreign exchange reserves.

To address these challenges, Pakistan is seeking a larger loan to stabilize its macroeconomic situation. The current $3 billion Stand-By Arrangement with the IMF is set to expire soon, with hopes of securing an additional $1.1 billion in the final tranche to support the economy.