In a notable turn of events, the Monetary Policy Committee (MPC) of the State Bank of Pakistan has reported a remarkable 65.9 percent year-on-year improvement in the current account balance, with the deficit narrowing to $1.1 billion during the Jul-Oct period of FY24. This positive shift has been attributed to a decline in imports, a boost in exports fueled by food items, particularly rice, and an encouraging uptick in workers' remittances during October and November 2023, according to WealthPK. The surge in exports aligns with a strategic focus on agricultural products, notably rice, contributing to the overall economic recovery. The State Bank of Pakistan (SBP) and government initiatives played a pivotal role in incentivizing the formal transfer of funds, enhancing remittances through official channels, and normalizing the kerb premium. Even though the current amount is far less than the $520 million surplus at that time, this development is the first surplus since June 2023. Experts credit this excess to the nation's export and remittance growth as well as a minor decline in imports. Notably, in October 2023, Pakistan's current account deficit was $184 million. The nation's exports (goods and services) increased by a strong 12 percent to $3.364 billion in November 2023 from $2.999 billion in November 2022, according to the central bank data.

In addition, remittances for November 2023 were $2.25 billion as opposed to $2.17 billion during the same month of the previous year, indicating a little 4% increase. In an interview with WealthPK, Dr. Javed, senior economist at the Ministry of Planning, Development and Special Initiatives (PSDP), said despite these positive developments, challenges persist. Tepid official inflows since July, coupled with ongoing debt repayments, have led to a gradual decline in the SBP’s foreign exchange (FX) reserves. This situation has prompted concerns, emphasizing the delicate balance the country faces in managing its economic recovery. He said in response to these challenges, the MPC underscored the potential positive impact of the ongoing International Monetary Fund (IMF) program. The successful completion of the first review is anticipated to improve financial inflows and bolster the FX reserves position. This expectation reflects a broader strategy to navigate economic challenges and build a more resilient financial foundation. Javed said the gradual decline in the SBP's foreign exchange reserves underscored the intricacies of sustaining economic recovery, demanding a nuanced approach to balancing financial inflows and outflows. Continued vigilance and adaptive policies will be crucial in navigating these challenges and ensuring a resilient economic foundation for Pakistan, he added.

Credit: Independent News Pakistan (INP)