The State Bank of Pakistan’s (SBP) latest balance of payments report highlights the ongoing pressures on the country’s external accounts. The current account balance improved in September 2024, showing a surplus of $119mn, reversing from a deficit of $1.24bn in the previous year, signaling progress in addressing external imbalances. However, Pakistan continues to face significant challenges, particularly in managing its trade deficit.
Exports of goods increased by 7.8pc in September 2024 compared to the same period last year, reaching $7.5bn, while imports surged by 15.7pc, rising to $14.2bn. This resulted in a trade deficit of $6.7bn for September, highlighting the ongoing issue of high imports, which continue to outstrip export earnings.
Service exports also saw improvement, reaching $1.9bn in September, though this was offset by higher service imports totaling $2.6bn, resulting in a $699mn trade deficit in services.
One of the concerning aspects of the report is the country’s primary income deficit, which worsened to $1.99bn due to high outflows of profits and interest payments. This reflects the challenges Pakistan faces in managing foreign debt obligations and repatriations of profits by foreign investors.
On a positive note, workers’ remittances remained strong, contributing $8.7bn in the first quarter of FY25, which is a key source of foreign exchange for the country. These inflows helped offset some of the pressures from the trade deficit.
Additionally, the financial account recorded improvements, with net borrowing narrowing, and foreign direct investment (FDI) in Pakistan reaching $771mn in September, up from $385mn in the same period last year. However, the overall balance remained under pressure, with reserves and related items showing an outflow of $383mn in September.
Pakistan’s foreign exchange reserves showed positive momentum, rising to $11.98bn by the end of September 2024, providing a buffer against external shocks. Nonetheless, the country’s external vulnerabilities remain significant, with the balance of payments showing persistent structural weaknesses.
