Karachi, May 17, 2023 (PPI-OT): Higher SBP imports limit Apr-2023 CAS to US$18mn
Current account balance reported second consecutive surplus in Apr-2023, clocking in at US$18mn. Surplus balance was led by further contraction in imports, with relatively steady remittances.
While a surplus was largely expected, the balance came in way lower than estimates as SBP trade deficit came in at US$1.4bn, vis-a-vis PBS trade deficit of US$829mn.
Going forward, with expected debt rollovers, further external support may be received from ongoing stricter import conditions and declining oil prices, the former however compromising growth outlook.
Apr-2023: Current account surplus lower than estimates
Current account balance reported second consecutive surplus in Apr-2023, clocking in at US$18mn. Surplus balance was led by further contraction in imports, with relatively steady remittances.
While a surplus was largely expected, the balance came in way lower than estimates. To recall, trade deficit under PBS data clocked in at US$829mn, which was US$1.4bn lower than remittances of US$2.2bn, giving rise to higher surplus in current account this month. The SBP trade deficit, however, reported trade deficit of US$1.6bn, only US$600mn lower than remittances. Hence, the current account balance was reported close to break-even post the US$550mn negative income balance.
The reason of material difference in PBS and SBP trade deficit data came from a huge gap in imports of both. Historical data suggests PBS imports have been ~US$400mn higher than SBP imports, over timing difference of import payments. In the month of Apr-2023, however, SBP imports not only came in higher than PBS imports, the difference stood at a high of US$750mn, an unprecedented gap. We await detailed trade data of PBS for better understanding of the gap.
External account support required
Balance of Payments reporting a surplus of US$385mn for Apr-2023, over absence of material debt payments, maintained import cover at around 5 weeks. Movement of SBP’s foreign exchange reserves for the remaining two months of the fiscal year is highly dependent on lenders rolling over their respective receipts due from Pakistan. Further external support may be received from ongoing stricter import conditions and declining oil prices, the former however compromising growth outlook.