Karachi, April 25, 2022 (PPI-OT): External Balance – Mar-22, C/a deficit up US$ 1.03bn; GoP seeks a larger rescue package from IMF
As per the data released by SBP for the month Mar-22, Pakistan’s Current Account (C/A) balance recorded a deficit of US$ 1.03bn compared to previous month deficit of US$ 0.52bn. This brings 9 months cumulative balance to post a deficit of US$ 13.17bn versus last year same period, a negligible deficit of US$ 0.28bn.
For the month of Mar-22, Pakistan’s trade deficit came at US$ 3.17bn up by +41%m and +14.3% on a yearly basis. Country’s services deficit also slightly narrowed down to US$ 0.26bn compared to US$ 0.29bn in previous month. Remittances, for the month clocked in at US$ 2.8bn up by +28%m (3.2%y) when compared to previous month inflow of US$ 2.2bn.
Given the rising commodity prices, especially oil prices that remain above $100/bbl and domestic and geo-political uncertainty, we project C/A deficit to remain elevated in the coming months; however, some relief is expected in coming months as confidence in IMF resumption elevates with EFF package to be extended to US$ 8bn.
Monthly C/A deficit down to US$ 2.56bn
As per the data released by SBP for the month Mar-22, Pakistan’s Current Account (C/A) balance recorded a deficit of US$ 1.03bn compared to previous month deficit of US$ 0.52bn. This brings 9 months cumulative balance to post a deficit of US$ 13.17bn versus last year same period, a negligible deficit of US$ 0.28bn.
Monthly exports first time crossed US$ 3bn mark; up by 25% compared to Import bill up by 13%
For the month of Mar-22, Pakistan’s trade deficit came at US$ 3.17bn up by +41%m and +14.3% on a yearly basis. This sharper monthly growth in trade deficit is primarily due to low base effect (last month trade deficit recorded -2.26bn). In terms of absolute net export and import bill on mm basis, exports grew by just $184mn compared to rise in imports by $1.1bn. Considering the period this brings total trade deficit to US$ 30.1bn compared to US$ 19.4bn last year same period, a deterioration of nearly 56%y.
Little or no support from services balance
Country’s services deficit also slightly narrowed down to US$ 0.26bn compared to US$ 0.29bn in previous month. This takes 9 months total services deficit to US$ 3.2bn compared to US$ 1.9bn last year same period; a 64%y growth. Income (ex-remittances) deficit shrink albeit merely to US$ 0.44bn from US$ 0.16bn in previous month, taking total period sum to US$ 2.85bn compared to US$ 0.42b.
Ramadan spur remittances growth; up +28%m to US$ 2.8bn
Remittances, for the month clocked in at US$ 2.8bn up by +28%m (3.2%y) when compared to previous month inflow of US$ 2.2bn. However, for the 7 months period remittances are up by +7%y to US$ 22.9bn compared to US$ 21.4bn last year same period.
Financial Account recorded an outflow of US$ 3.6bn owning to loan maturity
An outflow of US$ 3.6bn in the financial account brought overall balance of payments to negative position of US$ 4.6bn for the month of March. During the month, loan amounting to US$2.9bn has been paid, while direct investments and portfolio investment recorded US$ 0.24mn and US$ -0.4mn respectively.
Outlook
Given the rising commodity prices, especially oil prices that remain above $100/bbl and domestic and geo-political uncertainty, we project C/A deficit to remain elevated in the coming months; however, some relief is expected in coming months as confidence in IMF resumption elevates with EFF package to be extended to US$ 8bn.