Current account records surplus of $424m in July

KARACHI: Pakistan’s current account swung into a surplus in July 2020, recorded at $424 million, after posting a deficit of $100 million in June 2020, according to data released by the State Bank of Pakistan on Monday.

This is also an improvement on the $613 million deficit recorded in July 2019.

In a Twitter thread, the SBP said this was the fourth monthly surplus since last October. However, this is actually the second surplus since October 2019. The last surplus before July was in May 2020, when the current account surplus was recorded at $13 million. Before May, the last surplus recorded was in October 2019, at $99 million. At the time, that was the first surplus in almost four years. 

1/3 Pakistan’s current account balance swung into a surplus of $424 mn in July 2020 after posting a deficit of $100 mn in June. For details: https://t.co/fMcRUupmT2

— SBP (@StateBank_Pak) August 24, 2020

According to the SBP, much of this drastic fall in July was driven by a recovery in exports and record-high remittances, along with support from several policy and administrative initiatives by SBP and the government. 

Exports stood at $1.89 billion in July 2020, or a 19.7pc rise when compared to June’s figure of $1.58 billion. June’s figure itself was a rise of 25.5pc, when compared with exports in May 2020. 

However, exports in July fell 14.6pc year-on-year when compared to July 2019. Imports also fell by 13.3pc year-on-year. 

Therefore, instead of looking at exports or imports as an indicator, much of the improvement can be attributed to secondary income transfers, which is driven primarily by a rise in remittances. 

Last week, the SBP reported that remittances reached $2.77 billion in July, which is the highest ever level of remittances in a single month in Pakistan. Significant job losses in Saudi Arabia and the Gulf region due to the Covid-19 pandemic have led to an increase in savings being sent home to Pakistan, along with an increased use of official channels. 

The turnaround was appreciated by the Pakistani Tehreek-i-Insaf (PTI) government. Prime Minister Imran Khan tweeted, “MashaAllah Pakistan’s economy is on the right track. After current account balance posted deficit of $613 mn in July 2019 & a deficit of $100 mn in June 2020, in July 2020 current account balance swung upwards to a surplus of $424 mn.”

MashaAllah Pakistan's economy is on the right track. After current account balance posted deficit of $613 mn in July 2019 & a deficit of $100 mn in June 2020, in July 2020 current account balance swung upwards to a surplus of $424 mn.

— Imran Khan (@ImranKhanPTI) August 24, 2020

He also said, “This strong turnaround is a result of continuing recovery in exports, which rose 20% compared to June 2020, & record remittances.”

Similarly, Planning Minister Asad Umar tweeted, “PTI govt inherited a current account deficit of 2 billion $/ month as a legacy of PML N. In July 2020 Pakistan ran a current account surplus of 424 million $. Remember the current account deficits have led to massive external debt and compromises our independence and security.”

PTI govt inherited a current account deficit of 2 billion $/ month as a legacy of PML N. In july 2020 Pakistan ran a current account surplus of 424 million $. Remember the current account deficits have led to massive external debt and compromises our independence and security

— Asad Umar (@Asad_Umar) August 24, 2020