Current account turns surplus in four months on higher remittances, exports

Bundles of freshly printed US dollar banknotes are processed for packaging at the US Treasury’s Bureau of Engraving and Printing in Washington on July 20, 2018. — AFP

KARACHI: Pakistan recorded a current account surplus in the first four months of the fiscal year 2025, driven by increased remittances from Pakistani citizens working abroad and higher exports.

The country posted a surplus of $218 million in July-October FY25, compared with a deficit of $1.528 billion in the same period last fiscal year, the central bank data showed on Monday.In October, the current account surplus increased by a significant 306 per cent month-on-month (MoM) to $349 million, marking the third consecutive month of surplus. In October of the last year, the country had a deficit of $287 million.

“The primary reason for improvement in the current account is the strong growth in exports and remittances, combined with a modest reduction in imports,” said Awais Ashraf, director research at AKD Securities Limited.

Overseas Pakistani workers remitted $11.85 billion in the period from July to October FY25, which is a 35 per cent increase compared with a year earlier. This upward trend in remittances indicates that contributions from foreign workers are helping to support the sluggish economy by stabilising the local currency and reducing the current account deficit. Furthermore, recent reforms aimed at curbing illegal foreign exchange trading and a decline in global inflation have enabled overseas Pakistanis to remit even more funds back to Pakistan. In October alone, remittances rose by 24 per cent year-on-year and by 7.0 per cent month-on-month, totalling $3.052 billion.

According to data from the SBP, the country’s goods exports increased by 9.0 per cent, reaching $10.508 billion in the first four months of the current fiscal year. Exports rose by 15 per cent MoM and 11 per cent YoY, amounting to $3.022 billion in October. However, imports also increased during this period, rising by 13 per cent to $18.832 billion from July to October of FY25. In October, imports grew by 5.0 per cent MoM but fell by 2.0 per cent YoY, totalling $4.608 billion.

The balance of payments figures come after the completion of the interim review of the International Monetary Fund’s (IMF) $7 billion programme, with reports indicating that Pakistan has met the required benchmarks. Finance Minister Muhammad Aurangzeb noted that the country discussed the bailout reform agenda with the IMF during an unscheduled staff visit last week, suggesting that no new taxes will be imposed. According to the IMF, based on the preliminary findings of its mission, staff will prepare a report that pending management approval, will be presented to the IMF’s Executive Board for discussion and decision.

The SBP projects that the current account deficit for FY25 will be in the range of zero to 1.0 per cent of the gross domestic product (GDP). With a manageable current account deficit and the realisation of planned official inflows, foreign exchange reserves are expected to increase to $13 billion by June 2025. As of November 8, the SBP’s reserves stood at $11.26 billion.

Furthermore, the SBP has said that gross financing requirements are anticipated to be met. Out of a total of $26.1 billion in external repayments for FY25, the country needs to repay $6.3 billion over the remaining eight months of the current fiscal year.