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Business News/ News / World/  Pakistan's tough fiscal measures result in two-year high current account surplus
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Pakistan's tough fiscal measures result in two-year high current account surplus

The Pakistani government has made various economic modifications including hikes in fuel prices, raising taxes, and others demanded by the International Monetary Fund (IMF) to release the bailout package.

Pakistan posts first current account surplus in over 2 years. Premium
Pakistan posts first current account surplus in over 2 years.

Crisis-hit Pakistan reported a current account surplus for the first time in almost two and a half years due to an ongoing ban on non-essential imports in a country that’s waiting for the International Monetary Fund (IMF) to revive a $6.5 billion bailout program.

According to data from the State Bank of Pakistan, the current account was a surplus of $654 million in March 2023. The country recorded a current account surplus last in November 2020 amid the Covid-19 pandemic curbs.

The latest reading is unlikely to provide a relief to the $350 billion economy that is slowing down sharply as the Washington-based lender deliberates on whether to resume the loan program. The IMF wants Pakistan to secure financing support for the fiscal year ending June.

Analysts at Topline Securities thanked the tighter monetary and fiscal measures along with administrative steps taken by the federal government amid the country's worst economic crisis.

The Pakistani government has made various economic modifications including hikes in fuel prices, raising taxes, and others demanded by the financial body for loans.

Saudi Arabia and the United Arab Emirates provided financing assurances helping the nation inch closer to the IMF funding and avert a default.

However, the lender is still seeking further assurances to ensure Pakistan has fulfilled the condition of arranging the $6 billion financing to reach a staff-level agreement. 

Nathan Porter, the IMF’s Mission Chief to Pakistan said that there was an agreement on the need to maintain strong financial policies and secure sufficient financing during the meeting between the Pakistani delegation and IMF staff.

He added that the IMF looks forward to obtaining important financing assurances as soon as possible to unlock the bailout package.

Responding to IMF's recent remarks, Pakistan Prime Minister Shehbaz Sharif emphasized that the country has now met all ‘tough’ conditions laid forth by the financial body and now it has ‘no excuse’ to delay the state-level agreement.

“Pakistan was not created to run on debts and act like beggars because their forefathers and different generations had given sacrifices for the motherland," PM Shehbaz said. 

In absence of funding support, Pakistan’s dollar stockpile has declined to less than a month’s worth of imports, restricting its ability to fund overseas purchases and leading to production halts by several industries. Pakistan’s growth has been revised to 0.5% from 2% for year ending June by the IMF.

PM Sharif banned imports of luxury products, including raw materials for assembling mobile phones and manufacturing steel in May last year. Carmakers and pharma companies have also been impacted by import restrictions.

In Pakistan, imports fell more than 40% to $3.83 billion in March, the lowest since August 2020, while remittances rose to $2.53 billion, 27% higher than a month earlier.

The nine-month current account deficit stood at $3.37 billion vs $13 billion from a year ago, the latest data showed.

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Published: 20 Apr 2023, 09:55 AM IST
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