Pakistan’s Current Account swings to deficit in Dec’20 after five-month surplus

January 21, 2020 (MLN): After five months of consecutive surplus, the Current Account Balance entered the negative zone in December 2020 due to higher imports on the back of the domestic economic recovery, official data showed Wednesday.

Pakistan recorded a current account deficit of $662 million in December 2020 after a revised surplus of $513 million the previous month.

As per data released by the State Bank of Pakistan, the deficit surged by 131% from $287 million in the same month of last year.

During 1HFY21, the surplus reached $1.13 billion, compared with a deficit of $2.03 billion in the corresponding period of the last fiscal year.

Higher deficits on both Balance on Trade in Goods and Services by 50% MoM and 256% MoM, respectively resulted in a current account deficit for the month. The deterioration in Balance on Primary Income by a whopping 97% also played its part.

Exports, a key driver of growth, increased by a mere 0.58% MoM to $2.25 billion in December 2020 while imports jumped by 32% MoM to $5.02 billion, resulting in a trade deficit of $2.77 billion in the month. The increase in imports is largely attributable to some essential food imports as well as growth-enhancing capital goods, oil, and industrial raw materials.

The trade balance in services, while still negative, also worsened by 3.55 times MoM to $128 million courtesy of a 23% and 38.5%, MoM increase in exports and imports respectively.

However, Workers' Remittances during December 2020 improved by a slight 4% MoM to $2.44 billion from $2.34 billion in November 2020.

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