KARACHI: Pakistani Prime Minister Imran Khan said on Monday the economy was on the “right track” after the South Asian country posted a current account surplus of $424 million for July 2020, mostly due to continued recovery in exports and record-high remittances.
"Pakistan's economy is on the right track,” Khan said in a tweet. “After current account balance posted deficit of $613 mn [million] in July 2019 & a deficit of $100 mn in June 2020, in July 2020 current account balance swung upwards to a surplus of $424 mn. This strong turnaround is a result of continuing recovery in exports, which rose 20 % compared to June 2020, & record remittances.”
Despite the coronavirus pandemic, Pakistan has recorded export growth of over 6 percent to $2 billion in July 2020, the first month of the current fiscal year, as compared to July 2019, and 25.14 percent as compared with June 2020. The balance of trade has been in the negative, 19.8 percent in July 2020, according to the Pakistan Bureau of Statistics.
Remittances, another major component of the current account, also hit a record high of $2.8 billion in July 2020.
The central bank said the current account surplus in July 2020 was the fourth monthly surplus since last October, and a significant improvement on the deficit of $613 million in the same month last year.
“Strong turnaround is due to a continued recovery in exports and record-high remittances, with support from several policy and administrative initiatives by SBP [State Bank of Pakistan] and government”,” the central bank said.
Dr. Khaqan Najeeb, who has served as an advisor to the Ministry of Finance, said current account reduction in July 2020 and in fiscal year 2020 had proved ‘positive’ for Pakistan's balance of payments.
The current account reduction in fiscal year 2020 has proved ‘positive’ for #Pakistan's balance of payments but the adjustment has come at a heavy cost says former @FinMinistryPak advisor, Dr. @KhaqanNajeeb || #Economy
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Read special by @Khurshid72 : https://t.co/PxT4LyJSgA pic.twitter.com/ez7YoWvBgW— Arab News Pakistan (@arabnewspk) August 24, 2020
“However this adjustment has been at a heavy price of a strong slowdown in the economy adversely affecting jobs and poverty,” he added.
Najeeb said month on month growth in July exports was due to a low base effect of May and June 2020 and they remained down by 15 percent year on year also” “Hopefully increased remittances is due to a shift to formal channels,” he added.
Economists say the country may not be able to sustain such surplus levels in the future because imports are also depicting a growth trend.
“Over the long term the country may not sustain surplus though there are substantial export orders but simultaneously the imports are also increasing because when exports increase imports also increase”, senior economist Muzamil Aslam said. “However, we would see the deficit within the $3 billion range.”
Najeeb said a tightened monetary policy and exchange adjustments, which started from early 2019, had helped curtail imports.
“But the new taxation of Rs 750 billion in 2019 has adversely impacted large scale manufacturing,” he said.
