December 28, 2020 (MLN):  Despite challenges due to the coronavirus pandemic, Ministry of Finance expects Pakistan’s exports during 6MFY21 to remain around the levels observed in the same period of previous fiscal year, while imports to remain slightly lower.

This suggests that the ongoing economic recovery mainly represents increased domestic production for use in domestic markets, said Finance Ministry in its Monthly Economic Outlook.

According to the report, during July – November exports of goods and services, as compiled in the Balance of Payments reached 12 billion USD as compared to 13 billion in the same period of last year. Likewise imports of goods and services reached 21 billion this year against 22 billion last year. The trade balance thus remained at the level seen in July-November FY 2020.

In November 2020, Current Account remained in surplus ($447 million) for fifth consecutive month. Thus, Current Account posted a surplus of $1.6 billion (1.4% of GDP) during Jul-Nov FY21 against a deficit of $1.7 billion last year (-1.6% of GDP). 

The contractions in import payments for both goods and services were the primary factors, coupled with healthy growth in workers’ remittances resulted in surplus of current account.

During July-November FY21, remittances rose to $ 11.8 billion ($ 9.3 billion last year), with a growth of 26.9%. On YoY basis, remittances recorded $2.3 billion showing an increase of 28.4% in November 2020 compared to $ 1.8 billion in November 2019. Workers’ remittances remained above $ 2.0 billion for the sixth consecutive month in November 2020

Finance Ministry noted that remittance inflows keeping its trend seen in previous months, will remain at a high level and are expected to compensate for the trade balance deficit in the first half of the current Fiscal year.

With regards to reserves, the report highlighted that the current level of reserves is sufficient to cover the import of around 3 months. As per the latest data, Pakistan’s total foreign exchange reserves increased to $20.3 billion by the end of Nov’20, up by $4.3 billion over end-November 2019. The breakup of reserves accumulation in November 2020 shows that the SBP’s reserves stood at $13.1 billion ($9.1 billion last year) and $7.2 billion ($6.9 billion last year) in commercial banks’ reserves.

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