Karachi, December 19, 2022 (PPI-OT): Pakistan Economy: CAD improves in Nov’22, blip or trend

Pakistan’s Current Account Deficit (CAD) for Nov’22 improved to a paltry US$276mn, compared to US$569mn in the earlier month. This takes Pakistan’s CAD for 5MFY23 to US$3.1bn, lower by 57%YoY. The improvement in the month’s numbers is largely attributable to better trade balance during the month, with the balance of trade on goods and services receding to US$2.09bn, compared to US$2.30bn in Oct’22.

Petroleum Group imports emerged as a breath of fresh air during the month, with SBP data indicating a US$213.7mn or 15% MoM drop in the group’s imports (US$115mn or 29%MoM drop in petroleum crude imports and US$90.1mn or 25% drop in LNG imports), clocking in at US$1.25bn for the month.

The differential between total import figures reported by SBP and PBS has widened to ~US$919mn, with the PBS figures higher as compared to SBP’s published figures. To note, the 10-year average stands at US$344mn.

Workers’ Remittances clocked in at US$2.11bn for the month of Nov’22, compared to US$2.22bn in the earlier month. To recall, remittances inflows averaged ~US$2.61bn per month during FY22 and have averaged US$2.40bn in 5MFY23.

Foreign Direct Investments (FDI) dropped to US$81.8mn in Nov’22, compared to US$84.7mn in the earlier month and US$158.4mn in the SPLY. This takes the 5MFY23 FDI to US$430.1mn, lower by 51.4%YoY.

Export demand has been hindered due to economic challenges in Pakistan’s export markets and cashflow issues being faced by major exporting sectors, i.e. Textiles. On the other hand, imports are expected to remain around current levels, unless commodity prices drop substantially. While we expect the CAD for FY23 to clock in at US$10.5-11bn, we may look to revise our numbers.