Pakistan records highest monthly current account surplus in over a decade
Pakistan achieved a significant milestone in November 2024, posting its highest monthly current account surplus in over a decade, reaching $729 million. The surplus, the largest since February 2015, was fueled by a combination of higher remittances, a narrowing trade deficit, and reduced interest and dividend repatriations. This marks the fourth consecutive month of surplus, signaling a positive turnaround for the national economy.
A 14% month-on-month (MoM) decline in the trade deficit to $1.36 billion and a 43% drop in the services deficit to $152 million played pivotal roles in achieving the surplus. Goods imports fell by 10% to $4.14 billion, while services imports dropped by 13% to $828 million. Exports of goods and services showed moderate year-on-year (YoY) growth, rising by 3% and 8% respectively.
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Remittances surged 29% YoY to $2.9 billion in November, driven by inflows from Saudi Arabia (up 34%), the UAE (up 50%), and the UK (up 20%). Over the first five months of FY25, remittances grew by 34% YoY to $14.8 billion, underscoring their critical role in stabilizing Pakistan’s external accounts.
During the first five months of FY25, Pakistan recorded a cumulative current account surplus of $944 million, a significant improvement from the $1.67 billion deficit in the same period last year. This turnaround was attributed to reduced imports, steady remittance growth, and improved export performance. The trade deficit for the period stood at $10.8 billion, marking a 7% YoY increase due to rising imports, despite recent monthly improvements.
Foreign Direct Investment (FDI) also showed encouraging growth, with net inflows of $219 million in November, up from $133 million in October. Cumulatively, FDI inflows rose 31% YoY to $1.1 billion in the first five months of FY25.
The State Bank of Pakistan (SBP) recently reduced the policy rate by 200 basis points to 13%, marking the fifth consecutive rate cut in 2024 and bringing the total reduction to 900 basis points. This decision, backed by a decline in inflation to 4.9% in November, aims to stimulate investment and foster economic growth.
SBP Governor Jameel Ahmad highlighted the impact of improved remittances and a stronger trade balance on the surplus. He projected that the current account deficit would settle within the lower bound of the projected 0-1% of GDP for FY25. Additionally, he emphasized efforts to maintain adequate foreign exchange reserves, which are expected to exceed $13 billion by June 2025.
Prime Minister Shehbaz Sharif expressed satisfaction over the economic progress, attributing the record surplus to effective government policies. He noted that the increase in the surplus, coupled with a declining inflation rate and reduced policy rate, would strengthen Pakistan’s position in the global economic market. The prime minister also commended the economic team for their efforts and emphasized the importance of promoting local and foreign investments to sustain growth.
Shehbaz also unveiled plans for a home-grown economic program aimed at fostering domestic investment and announced its formal launch in an upcoming event.
Despite the positive indicators, challenges such as rising imports persist. The cumulative goods deficit for FY25 remains substantial, highlighting the need for continued economic reforms. However, the narrowing trade and services deficits, coupled with robust remittance inflows and FDI growth, provide a strong foundation for further stabilization.
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