The monthly streak of year-on-year surplus in the current account continues, in a sign of sustained, gradual economic recovery that could lead to economic stabilisation in line with the IMF programme. Pakistan’s current account balance posted a surplus — of $447 million — for the fifth consecutive month in November as compared to a deficit of $326m during the same time last year, according to the data released by SBP on Tuesday. On a cumulative basis, the total current account balance during the first five months of the ongoing fiscal year i.e. FY21 registered a record surplus of $1.64 billion against a deficit of $1.745 billion during the same period in the previous fiscal year.
The continued surplus in the current account from July to November 2020 has led to the central bank’s foreign exchange reserves rising by around $1 billion in November 2020 — currently standing at a three-year high of $13.1 billion. However, this consistency in the current account surplus is mainly caused by the rise in remittances from aboard which have jumped 27% to $11.77 billion during the five months under review. And this rise in remittances has resulted from the Covid-related travel restrictions that have driven increased flows through legal channels.
Apart from boosting remittances, the raging pandemic has also benefited Pakistan’s exports which have contributed to the current rise in inflows. As much of the world is shut due to Covid-19, Pakistani manufactures are getting far more than normal export orders, especially in the textile sector. However, it is expected that with the beginning of the anti-Covid vaccination process, things will start normalising the world over and the local economy will also open up — something that is likely to take back the remittances and export proceeds to the normal level, and the much-celebrated surplus in the current account may therefore vanish. The government needs to stay prepared beforehand.
Published in The Express Tribune, December 24th, 2020.