Karachi, February 20, 2023 (PPI-OT): Economy – Jan-23: C/a Deficit Drops Down to US$0.24; Imports Further Narrowed

For the month of Jan-23, C/a balance registered a deficit of US$ 0.24bn compared to US$ 0.29bn recorded during the month of Dec-22. This brings 7mFY23 cumulated balance to post a deficit of US$ 3.8bn versus last year same period a deficit of US$ 11.6bn, a decrease of 67%y/y.

During the month of Jan-23, remittances posted US$ 1.89bn compared to previous month of US$ 2.1bn, a decline of 10%m/m. To recall, last year remittances printed an all-time high of US$ 3.1bn during the month of Apr-22, and since then has been on a declining trend.

C/a Balance has been curtailed under US$1.0bn since Aug-22, averaging US$ ~0.42bn per month in FY23TD. As dollar reserves come under the scarce zone, we believe this continuation in imports squeeze cannot be ruled out in the near term.

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

Monthly current account deficit printed US$0.24bn as trade balance further narrowed

For the month of Jan-23, C/a balance registered a deficit of US$ 0.24bn compared to US$ 0.29bn recorded during the month of Dec-22. This brings 7mFY23 cumulated balance to post a deficit of US$ 3.8bn versus last year same period a deficit of US$ 11.6bn, a decrease of 67%y/y. To recall, Pakistan has been reporting a deficit since Dec-20. Ex-oil Current account balance reported a surplus of US$ 1bn for the month up by 4%m/m.

Exports slightly down 4%m/m as food and textile groups witness decline

For the month, country’s export receipts recorded at US$ 2.2bn compared to last month of US$ 2.3bn, a decline of 4%m/m, and on a yearly basis it is down by 12%y/y. Jan-23 monthly export number is lower than last year’s monthly average export of US$ 2.5bn. This drop in monthly exports is on the back of textile and food items mainly basmati rice and cotton related products.

Imports fell by 7%m/m mainly due to decline in raw cotton imports

During the month of Jan-23, country’s import bill comparatively fell steeper than exports to US$ 3.9bn down 7%m/m and 37%y/y. During the month, food imports continued its uptrend and recorded US$ 0.74bn compared to last month US$ 0.69bn, an increase by 7%m/m, indicating surge in food demand yet below post high imports following Jul-22 floods where average monthly food import bill was 0.84bn. However, overall import bill was contained primarily owing to significant drop in raw cotton imports, coupled with decline in machineries, metals, and chemicals.

Remittance drops below US$ 2bn mark for the first time since May-20

During the month of Jan-23, remittances posted US$ 1.89bn compared to previous month of US$ 2.1bn, a decline of 10%m/m. To recall, last year remittances printed an all-time high of US$ 3.1bn during the month of Apr-22, and since then has been on a declining trend. Major inflows came from Saudi Arabia and United Kingdom.

Outlook

C/a Balance has been curtailed under US$1.0bn since Aug-22, averaging US$ ~0.42bn per month in FY23TD. As dollar reserves come under the scarce zone, we believe this continuation in imports squeeze cannot be ruled out in the near term. However, once reserves begin to prop up, we may see imports to normalize.