Qudsia Bano

Pakistan is witnessing a series of positive economic developments, painting a promising picture for the nation's fiscal health, according to the August 2024 Balance of Payments (BoP) data released recently. Notably, exports of goods and services experienced a robust 13.8 percent month-on-month (MoM) increase, while imports showed a marginal rise of 1.4 percent during the same period. This surge in exports has had a significant impact on trade deficit in goods and services, which decreased by 12.6 percent on a MoM basis in August. Furthermore, worker's remittances registered a commendable increase of 3.2 percent in the same month. These favorable factors have collectively contributed to a substantial improvement in Pakistan's current account, with the deficit shrinking by approximately 79 percent on both a MoM and a year-on-year (YoY) basis.

Additionally, Pakistan's primary export markets, including the United States, the United Kingdom, the EU, and China, have shown an upward trend in their monthly Leading Indicator (CLI) positions, indicating clear positive prospects for export growth in the coming months. Hamid Haroon, the World Bank ex-economist, told WealthPK that the August 2024 BoP data reflected a promising turnaround in the nation's economic fortunes. “It's particularly noteworthy for several reasons. First, the significant uptick in exports of goods and services, which increased by 13.8 percent on a month-on-month (MoM) basis, demonstrates the resilience of Pakistan's export sector. This growth is a testament to the nation's competitiveness in the global market. The decrease in the trade deficit of goods and services by 12.6 percent MoM in August is a welcome sign, indicating that the efforts to bolster exports are bearing fruit,” he said. He also said that worker’s remittances, a key factor for Pakistan’s economy, rose by 3.2 percent in August.

This shows the confidence and backing of expatriates, who play a crucial role in keeping the country’s current account (CAD) stable. The drop in the current account deficit by around 79 percent on both MoM and year-on-year (YoY) basis is a clear indicator of a positive turnaround in the country's external balances. This reduction is a sign that the measures taken to manage the deficit are working. “Looking forward, the recent administrative actions against speculative activity in the foreign exchange market are expected to continue driving positive impacts. These actions will not only boost remittances but also stimulate trade and, in turn, bolster the current account balance,” he added. Nonetheless, as imports are likely to increase gradually to stimulate economic activities, prudent management of the trade balance will be essential to maintain a sustainable current account, he said. Pakistan’s challenge is to maintain export-led growth and manage imports well for economic stability.

Credit: INP-WealthPk