Current account gap shrinks 92pc in first quarter

KARACHI: The current account posted a surplus of $119 million in September for the second consecutive month, while the current account deficit (CAD) narrowed by 92 per cent in the first quarter of FY25.
According to data provided by the State Bank of Pakistan (SBP) on Monday, the first quarter witnessed a CAD of $98m against $1.2 billion in the same period of the previous fiscal year.
The meagre CAD in the first quarter is reflection of the government’s compromise on economic growth by not allowing imports of raw materials required to accelerate economic activities.
Moreover, a rise of 39pc in remittances during the first quarter also helped the government keep the CAD at the lowest level.
It was reported earlier that the current account posted a $75m surplus in August, but after
corrections made by the State Bank it now stands at $29m.
The central bank’s annual report on State of the Economy estimated that the CAD would range between zero and 1pc of the GDP during FY25. This estimate indicates that the policy of controlled imports would remain intact.
According to experts, the interest rate is still too high for trade and industry despite three reductions. The State Bank estimates the growth rate for FY25 to range between 2.5 and 3.5pc.
The government got tremendous support from remittances which jumped by 39pc during the first quarter of FY25.
It received $8.78bn during this period, compared to $6.33bn in the last fiscal year. It means that the government got an additional help of $2.5bn in the shape of increased remittances.
Officials believe remittances may improve further or at least maintain the current trend of $2.8 to $3bn per month.
Exports of goods and services grew 10pc to $3.3bn during September while imports rose 15pc to 5.57bn.
However, during the first quarter exports of goods and services were $9.4bn, compared to imports of $16.8bn.
The country has been facing a serious problem of current account deficit, making debt servicing more burdensome. The government recently received over $1bn as the first tranche of the $7bn IMF loan.
The low CAD would help the country meet the daunting task of debt servicing. The government requires a total of $26.2bn for debt servicing in FY25.
Published in Dawn, October 22th, 2024