Pakistan posts current account surplus for the first time since 2015

A brass plaque of the State Bank of Pakistan is seen outside of its wall in Karachi, Pakistan December 5, 2018. (REUTERS/File Photo)
Updated 20 November 2019

Pakistan posts current account surplus for the first time since 2015

  • PM Khan says economy going in the right direction as economic reforms bear fruit
  • Experts believe current account deficit is expected to settle around $5 billion against budgetary expectations of $7-8 billion

KARACHI: Pakistan posted current account surplus after four long years, data released by the State Bank of Pakistan (SBP) showed on Tuesday, as the country’s measures to discourage imports started bearing fruit.

According to the SBP, the external account recorded a current account surplus of $99 million in October 2019.

Prime Minister Imran Khan has already said the country’s financial situation is moving in the right direction.

Previously, Pakistan had posted the current account surplus back in March 2015.

Khan also reiterated his claim about the health of Pakistan’s economy in a Twitter post on Tuesday, saying: “Pak economy finally heading in the right direction as more of our economic reforms bear fruit: Pak’s current account turned into a surplus in Oct 2019, for the first time in 4 yrs. The current account balance was +$99 mn in Oct 2019 compared to -$284 mn in Sept 2019 & -$1,280 mn in Oct 2018.”

He added: “For the first 4 months of our fiscal year our current account deficit has fallen by 73.5% compared to the same period last fiscal yr. Our exports of goods & services in Oct 2019 rose 20% over the previous month and 9.6% over Oct 2018. I congratulate our exporters & encourage them to do more.”

When Prime Minister Khan’s administration assumed the country’s political power back in 2018, Pakistan had posted its highest current account deficit of $19.89 billion in fiscal year FY18 that was reduced to $13.83 billion with a 30 percent reduction in FY19.

Experts maintain this owed to the government’s decision to cut down the import of luxury items.

The country’s cumulative current account deficit declined by 74 percent during the first four months of the current fiscal year between July and October (4MFY20) to $1.47 billion against the $5.56 billion recorded during the same period of the last fiscal year (4MFY19).

The balance of payments turned positive due to the decline of 21 percent of the total imports along with a 10 percent increase in the total exports on year on year (YoY) basis.

The four-month current account deceit is 1.6 percent of the country’s Gross Domestic Product (GDP) which was 5.5 percent during the same period of the last fiscal year (FY19).

Financial analysts expect the current account deficit of the country to cool down at about $5 billion.

“This year, the current account deficit is expected to settle at about $5 billion versus the earlier budgetary expectations of $7-8 billion,” Khurram Schehzad, senior financial analyst and CEO of Alpha Beta Core, a financial advisory firm, told Arab News.

However, economists also expressed concern over the substantial drop in the imports “of mainly capital goods” which, they said, was “leading to the closure of industries or deindustrialization,” in the words of Dr. Shahida Wizarat.

“If the trade deficit is reducing on the back of diminishing raw material or capital good imports that have become more expensive due to the devaluation of Pakistani rupee, it means the industries are closing down in the country. This also happened in the 1990s. There is no reason to celebrate trade deficit reduction in such a context,” she added.

Experts also called for import substitution through localization of industries driven by indigenous factors.

“It is about time we thought of economic growth that should be driven by indigenous factors by encouraging export-oriented investments and reducing the cost of doing business, starting with the reduction in interest rate,” Schehzad commented.

The country’s central bank is scheduled to announce its monetary policy on Friday.

Sindh cabinet approves bill to restore student unions

Updated 10 December 2019

Sindh cabinet approves bill to restore student unions

  • Document will now be tabled in the provincial assembly for approval
  • Student representatives call it a huge victory, urge earliest implementation

KARACHI: The government in Pakistan’s southern province of Sindh lifted a 35-year-old ban on student unions on Monday by approving a bill for the restoration of the same which representatives termed as a huge victory.

Murtaza Wahab, Sindh government’s spokesperson, said that the bill will be presented before the provincial assembly during the ongoing session.

“Sindh cabinet has approved the draft bill for restoration and regulation of student unions in the province. Bill will be laid before the Sindh Assembly in the ongoing session,” Wahab tweeted on Monday.

“The cabinet has made some changes to the draft. When it will go to the assembly there will be more changes. The standing committee will also consult different stakeholders before giving it a final shape,” Information Minister Saeed Ghani told Arab News, adding that the bill has been drafted keeping in mind the guidelines provided by the Supreme Court’s in 1993.

“The union can be a seven to 11 member body. Both government and private educational institutions will be bound to hold elections of the unions,” Ghani said.

The student unions were banned by military dictator Gen Zia-ul-Haq on February 9, 1984 and briefly revived by former Prime Minister Benazir Bhutto in 1989 but blocked once again by the Supreme Court in 1993 before any elections could be held.

In 2008, former Prime Minister Yousuf Raza Gilani had given his approval for the elections but none could be held throughout his tenure.

Student representatives welcomed the development on Monday.

Ammar Rashid, who was at the forefront of the Students Solidarity March, said due credit goes to the marchers.

“This is a huge victory for Pakistan and its people,” Rashid told Arab News.

Ashir Saleem, leader of Islami Jamiat Talaba, said that his organization welcomed the development.

“The Sindh government has taken a highly-needed step, which should have been taken since long,” Saleem told Arab News, adding that his organization had been protesting every year on February 9 since the ban was initiated in 1984.

A former union president, however, added a caveat.

“I doubt the intentions of the government. When you take a really good step but without preparations, you want to fail it,” Professor Shakeel Farooqi, president of the last student union in Karachi University in 1984, told Arab News.

“I have serious reservations.”

Farooqi said when universities were established in Pakistan it was ensured that these institutions must be based on the principle of democracy.

“There were not only student unions, student councils and departmental student societies but the dean of faculty would also be elected,” Farooqi, who has also served as President of the Karachi University Teachers’ Society (KUTS), said, adding that thee first dent in the university’s democratic culture was made by former Prime Minister Zulfiqar Ali Bhutto who put an end to the elections of the Dean’s office and the final blow came from General Zia-ul-Haq banned the unions in 1984.

“The political parties, whether the left’s Pakistan People’s Party (PPP) or the right’s Jamaat-e-Islami, didn’t support us although the students struggled for their right irrespective of their backgrounds. Both the leftists and rightists jointly struggled,” Farooqi said, adding that the ban has affected nine generations in the past 35 years.

“There is a dearth of leadership today and the intolerant behavior we see in parliament and on TV talk shows is the reflection of the loss due to ban on student unions,” Farooqi said, adding that “unions create leadership.”

Rashid, for his part, urged the Sindh government to take into account the students’ feedback before passing the bill into law.

“Sindh government has taken the lead and I am hopeful that others will follow. If other provinces don’t restore unions, the students would go to the courts for taking their due right,” he said.