Pakistan’s economic landscape for the fiscal year 2024 (FY24) has seen significant developments, with the country reporting its lowest Current Account Deficit (CAD) in over a decade, standing at US$0.7 billion, equivalent to 0.2% of GDP.
This marks an improvement compared to the average CAD of $8.3 billion (2.6% of GDP) over the past five years and $8.4 billion (2.7% of GDP) over the past decade.
According to data released by the State Bank of Pakistan (SBP) on July 19, 2024, June 2024 alone witnessed a CAD of US$329 million, reflecting a 33% month-on-month increase primarily attributed to higher primary deficit, particularly driven by dividend and profit repatriation activities authorized by the central bank in the final months of FY24.
The annual primary deficit for FY24 reached an all-time high of US$8.6 billion, as detailed in the SBP’s latest report, significantly surpassing previous records.
Analysts have pointed to a notable increase in profit and dividend repatriation during the fiscal year, totaling US$1.8 billion compared to US$313 million in the corresponding period of FY23.
This surge underscores heightened economic activity and investor confidence despite global economic uncertainties.
In terms of trade balances, Pakistan’s goods trade deficit improved by 11% to US$22 billion for FY24, bolstered by a 12% year-on-year increase in goods exports totaling US$31 billion, while imports rose marginally by 1% to US$53 billion.
Conversely, the services trade deficit widened by 122% year-on-year to US$2.3 billion, with imports increasing by 17% to US$10 billion and exports growing modestly by 3% to US$7.8 billion.
Geographically, the highest profit and dividend repatriations were observed in the United Kingdom (US$455 million), UAE (US$244 million), and China (US$177 million). Within sectors, significant repatriations were recorded in Financial Businesses (US$425 million), Power Sector (US$232 million), and Food (US$143 million).
On a positive note, remittances to Pakistan during FY24 totaled US$30.2 billion, marking an 11% year-on-year increase. The second half of the fiscal year saw a remarkable 30% surge in remittances, attributed to improved currency stability and economic conditions, which discouraged dollar hoarding and promoted remittance inflows.
Analysts anticipate the CAD to expand to US$5 billion or 1.2% of GDP in FY25, supported by projected remittances of US$32 billion, reflecting continued economic resilience and stability in Pakistan’s external sector amidst evolving global economic dynamics.
