Current account slips into deficit as imports rise despite narrowing trade gap: State Bank

Pakistan’s external accounts showed mixed signals during the ongoing fiscal year, as higher imports pushed the current account into deficit despite a significant improvement in the monthly trade balance, according to data released by the State Bank of Pakistan (SBP).

The country recorded a current account deficit of $812 million during the first five months of the fiscal year, reversing the $500 million surplus posted in the same period last year, official data showed. The widening gap largely reflects rising import demand amid strengthening domestic economic activity.

In November, imports fell 12 percent month-on-month to $4.72 billion, from $5.38 billion in October. As a result, the monthly trade deficit narrowed 11 percent to $2.59 billion, providing temporary relief on the external front.

Exports during November stood at $2.27 billion, narrowing the import-export gap to $2.45 billion. The services account posted a deficit of $180 million, while the primary income account recorded a decline of $740 million, bringing the combined deficit to $3.33 billion, more than 14 percent lower than in October.

According to economists, the improvement in the November figures reflects better export recovery and controlled import volumes. Analysts believe that the continued rise in workers’ remittances, which rose by 9 percent, is key to managing external pressures.

Remittances and other inflows helped cover a combined deficit of $3.18 billion, helping Pakistan post a $100 million current account surplus in November. However, experts have warned that rising imports could keep the current account under pressure unless export growth picks up in the coming months.