Karachi, September 18, 2023 (PPI-OT): Economy - Aug-23: C/a Deficit Sharply Drops Down to US$ 0.16bn as Exports Jumped

For the month of Aug-23, C/a balance registered a deficit of US$ 0.16bn compared to a deficit of US$ 0.8bn recorded during the month of Jul-22, a decrease of 79%m/m.

Aug-23 monthly export number is a good sign of revamping of industrial activities as it comes above 12MFY23 monthly average export number of US$ 2.3bn.

Normalization of imports helped exporting industries to procure raw materials which partly explains the higher export number. Moreover, we believe that remittances are likely to jump further owing to cracking down on illegal channels that will help divert funds toward formal channels.

We review current account balance numbers published for the month of Aug-23 by the State Bank of Pakistan (SBP).

Monthly current account deficit printed US$0.16bn as exports picked up

For the month of Aug-23, C/a balance registered a deficit of US$ 0.16bn compared to a deficit of US$ 0.8bn recorded during the month of Jul-22, a decrease of 79%m/m. This significant drop in deficit comes as exports climbed sharply.

Exports jumped by +14%m/m

For the month, the country’s export receipts recorded at US$ 2.4bn compared to last month's US$ 2.1bn, increasing by a +14%m/m basis, and on a yearly basis down by 11%y/y. Aug-23 monthly export number is a good sign of revamping of industrial activities as it comes above 12MFY23 monthly average export number of US$ 2.3bn. During the month, overall higher numbers were largely supported by the textile group, food group, and other exports primarily chemicals and pharmaceutical products.

On the other hand, Imports remained subdued

During the month of Aug-23, the country’s import bill recorded US$ 4.29bn slightly up by +2%m/m and down 28%y/y. During the month, food and transport imports declined, while machinery and petroleum imports ticked up.

Remittances up by +3%m/m

During the month of Aug-23, remittances posted US$ 2.1bn compared to the previous month of US$ 2bn, up by +3%m/m. Major inflows came from Saudi Arabia and UK, US$ 0.49bn and US$ 0.33bn respectively.

Outlook

C/a deficit number for the month of Aug-23 is taken positively by the market, as both exports and remittances improved, despite the latter slightly increased. Normalization of imports helped exporting industries to procure raw materials which partly explains the higher export number. Moreover, we believe that remittances are likely to jump further owing to cracking down on illegal channels that will help divert funds toward formal channels.