KARACHI: The first month of FY21 posted current account surplus of $424 million compared to deficit of $631m in July last year.

According to data issued by the State Bank of Pakistan on Monday, current account turned into a surplus in July from deficit of $100m in June.

This was the third major economic indicator showing improvement after remittances came in at record high in July while the foreign direct investment also surged by 61 per cent.

“This is the fourth monthly surplus since October and a significant improvement on the deficit of $631m in the same month last year,” said the SBP.

“Strong turnaround is due to continued recovery in exports and record high remittances, with support from several policy and administrative initiatives by SBP and the government. Exports sustained strong recovery with month-on-month growth of 19.7pc in July on top of 25.5pc in June,” it continued.

The improvement in exports, remittances, FDI and support by the government and the SBP through cheaper financing to almost all segments of the trade and industry helped the economy show signs of recovery from the effects of the Covid-19.

Total imports (goods plus services) for July witnessed an increase of 6pc month-on-month to $4,427m, from $4,176m in June.

However, on a yearly basis, total imports registered a decline of 13pc in July, from $5,065m in same period last year.

Meanwhile, the import of services is down by 9 per cent y-on-y and up by 29 per cent m-on-m during July 21.

However, total imports (goods + services) marked an increase of 6 per cent m-on-m ($4,427m) in July from $4,176m in June. With this, the balance of trade recorded a deficit of $2,098m compared, down from $2,201m, a decline of 5pc.

Some analysts believe that the country’s external account may face a hard time during FY21. This may be due to Saudi Arabia which has withdrawn about $1 billion from the SBP initially kept to support the balance of payments position.

The oil supply on deferred payment has also been reportedly stopped. Pakistan would have to spend more money for import of fuel while it could avoid the same (around $1bn) during FY20.

Published in Dawn, August 25th, 2020