Pakistan’s Current Account Surplus Reaches $729 Million in November 2024

H1: Pakistan Posts Historic Current Account Surplus in November 2024

In a major turnaround, Pakistan has achieved its highest current account surplus in over a decade, reaching $729 million in November 2024. This remarkable achievement marks a significant improvement, driven by robust remittances from overseas Pakistanis and a substantial decline in imports, despite challenges faced by the economy.

H2: Key Factors Behind the November Current Account Surplus

Several factors have contributed to the substantial growth in Pakistan’s current account surplus. The major drivers behind this surplus include:

1. Surge in Remittances: Remittances from Pakistanis working abroad surged by 29% year-on-year (YoY) to reach $2.9 billion in November 2024. This increase was particularly significant from major remittance-sending countries such as Saudi Arabia, the UAE, and the UK. Remittances have played a crucial role in stabilizing Pakistan’s external accounts, with a cumulative increase of 34% YoY over the first five months of FY2025.
2. Decrease in the Trade Deficit: The trade deficit saw a 14% month-on-month (MoM) decline in November, significantly contributing to the surplus. A drop in the imports of goods, particularly petroleum products and machinery, aided in reducing the overall trade deficit. This decline was also linked to a fall in global oil prices, as the average price of Arab Light crude dropped by 2% during the month.
3. Improvement in Services Deficit: The services deficit narrowed by 43% MoM, providing another boost to Pakistan’s external accounts. Despite an uptick in overall imports, the significant decline in services imports helped manage the deficit in this category.
4. Decline in Petroleum Imports: Petroleum imports experienced a notable 29% drop in November, primarily driven by lower international oil prices. This reduction was instrumental in narrowing the overall trade deficit, further supporting the current account surplus.

H3: Performance of Pakistan’s External Accounts in November 2024

The current account surplus of $729 million in November 2024 marks the highest monthly surplus since February 2015 and the second-largest since July 2013. This improvement comes after a challenging period for Pakistan’s economy, during which the country had to deal with several economic hurdles, including high inflation and a weak currency.

Remittances Drive Growth

The largest factor behind the surplus was the sharp rise in remittances. Remittances from overseas Pakistanis reached $2.9 billion in November, a growth of 29% compared to the same month last year. The inflows from Saudi Arabia increased by 34%, from the UAE by 50%, and from the UK by 20%. The cumulative remittance inflows for the first five months of FY2025 reached a staggering $15.3 billion, a 34% YoY increase.

These inflows have been vital for Pakistan’s foreign exchange reserves, allowing the country to cope with the external account challenges and reduce its reliance on borrowing from external creditors.

Decline in Imports and Reduced Trade Deficit

In addition to the increase in remittances, the decline in imports played a crucial role in the country’s improved current account position. The reduction in imports was particularly evident in petroleum, machinery, and food products. Petroleum imports dropped by 29%, driven by lower global oil prices, while machinery imports saw a 2% MoM decline, and food imports fell by 4%.

Overall, the trade deficit for November 2024 narrowed by 14% MoM, signaling a much-needed improvement in the country’s external balance.

Foreign Direct Investment (FDI) Shows Positive Growth

Foreign Direct Investment (FDI) also saw a positive trend in November 2024. Pakistan recorded net FDI inflows of $219 million in November, compared to $133 million in the previous month. The cumulative FDI for the first five months of FY2025 stood at $1.1 billion, marking a 31% YoY increase. This surge in FDI reflects growing investor confidence in the country, despite challenges in the global economic environment.

H2: Economic Implications of the Current Account Surplus

The $729 million surplus achieved in November 2024 holds significant implications for Pakistan’s economy. It marks a positive shift in the country’s economic trajectory and offers several benefits:

1. Strengthening of Foreign Exchange Reserves: The surplus has provided a much-needed boost to Pakistan’s foreign exchange reserves, which had been under pressure due to external debt repayments and a weak currency. The increased remittances and reduced imports have played a key role in stabilizing the reserves.
2. Improved Economic Sentiment: The current account surplus has also improved the overall economic sentiment in the country. This positive momentum is expected to continue, as Pakistan works to maintain a healthy external balance through increased exports, higher remittances, and reduced imports.
3. Inflation and Policy Adjustments: The policy rate cuts by the State Bank of Pakistan (SBP), which have been a key element in stimulating the economy, have helped bring down inflation to 4.9% in November 2024. The SBP’s decision to reduce the policy rate by 200 basis points to 13% was in response to the improving economic conditions, including the significant reduction in inflation.
4. Trade Balance and Economic Stability: The narrowing of the trade deficit, along with the growing remittance inflows, is indicative of broader economic stabilization. These improvements in the external balance are expected to continue supporting the country’s economic growth prospects in the medium term.

H3: The Role of Government Policies in Improving External Accounts

The government’s continued focus on improving the external balance through both monetary and fiscal policies has been a critical factor in achieving the current account surplus. Key steps taken by the government include:

1. Monetary Easing: The SBP’s decision to reduce interest rates has helped stimulate demand, lower borrowing costs, and improve liquidity in the economy. These moves have helped boost domestic consumption and investment, while also easing inflationary pressures.
2. Structural Reforms: The government has also implemented structural reforms aimed at improving the trade balance, such as incentivizing exports and reducing reliance on imports. Additionally, the government has taken steps to enhance Pakistan’s competitiveness in global markets.
3. Promotion of Export-Oriented Sectors: Pakistan has been working on increasing its exports through various measures, including providing incentives to exporters and improving trade relations with key partners. As a result, exports of goods have increased by 7% YoY, and services exports have grown by 8% YoY in November 2024.

FAQs:

1. What is the current account surplus for November 2024? The current account surplus for November 2024 stands at $729 million, marking a significant improvement for Pakistan.
2. How did remittances impact Pakistan’s current account surplus? Remittances from overseas Pakistanis surged by 29% YoY in November 2024, contributing significantly to the current account surplus.
3. What factors led to the reduction in the trade deficit in November 2024? The reduction in petroleum imports, machinery, and food imports, along with lower global oil prices, contributed to the narrowing of the trade deficit.
4. How did Foreign Direct Investment (FDI) perform in November 2024? FDI inflows increased by 31% YoY in the first five months of FY2025, reflecting a positive growth trend.
5. What role did the State Bank of Pakistan’s policy rate cuts play in improving economic conditions? The SBP’s decision to cut the policy rate helped stimulate economic activity, lower inflation, and support Pakistan’s external accounts.

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