FLASHNEWS:

IGI Securities Limited – Day Break (20 June 2023)

Karachi, June 20, 2023 (PPI-OT): Economy - Monthly C/A Surplus Clocks in at US$0.26bn as Exports Ramp Up

For the month of May-23, C/a balance registered a surplus of US$0.26bn compared to US$ 0.078bn recorded during the month of Apr-22.

For the month, country’s export receipts recorded at US$ 2.6bn compared to last month of US$ 2.1bn, an increase of +23%m/m, and on a yearly basis it is up by +4%y/y.

During the month of May-23, country’s import bill recorded US$ 3.8bn up +3%m/m and down 33%y/y.

These recent monthly C/a surpluses seem to be short lived as Pakistan may soon lift all restrictions on its imports in order to pave way for external funding by multilateral and bilateral partners.

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

Monthly current account deficit printed US$0.1bn as exports jump

For the month of May-23, C/a balance registered a surplus of US$ 0.26bn compared to US$ 0.078bn recorded during the month of Apr-22. This brings 11mFY23 cumulated balance to post a deficit of US$ 2.9bn versus last year same period a deficit of US$ 15.2bn, a decrease of 81%y/y.

Exports up +23%m/m as textile group rebounds

For the month, country’s export receipts recorded at US$ 2.6bn compared to last month of US$ 2.1bn, an increase of +23%m/m, and on a yearly basis it is up by +4%y/y. May-23 monthly export number is surprisingly just in line with last year’s monthly average export of US$ 2.6bn after a long period of below average exports. This sudden jump in monthly exports is heavily on the back of textile products mainly: cotton cloth, knitwear, bed wear, towels, and ready-made garments.

On the other hand, Imports slightly up by +3%m/m

During the month of May-23, country’s import bill recorded US$ 3.8bn up +3%m/m and down 33%y/y. During the month, food imports rose slightly on monthly basis and posted US$ 0.59bn compared to last month US$ 0.55bn, up by +6%m/m and down 21%y/y. Other than that, machinery, transport, and petroleum imports declined on monthly basis.

Remittances fall slightly

During the month of May-23, remittances posted US$ 2.1bn compared to previous month of US$ 2.2bn, a decline of 4%m/m. Major inflows came from Saudi Arabia and UAE, US$ 0.52bn and US$ 0.34bn respectively.

Outlook

C/a balance has been curtailed through import squeeze since Aug-22 as Pakistan faces shortages of dollar owing to debt servicing, delayed support from friendly countries and decline in exports and remittances. Domestic Supply constraint through import controls have hampered industrial activities. However, these recent monthly C/a surpluses seem to be short lived as Pakistan may soon lift all restrictions on its imports in order to pave way for external funding by multilateral and bilateral partners as reserves currently stand at critically low level and not sufficient enough to service its external debt in coming FY24.