Current account balance posting a nine-year high last month has rekindled hope. The $619 million surplus sitting in treasury has collectively reduced the current account deficit to $508 million in FY24, opening up a plethora of questions over its sustainability. The monthly excess is a short-term achievement which has been realised owing to surge in remittances during the month of Ramazan in March, and the inroads that the beleaguered political administration made by kick-starting a dialogue with the IMF for a new loan programme. At the same time, the overall trade deficit in goods and services was recorded at $17.412 billion compared to the deficit of $21.453 million last year. The statistics from SBP, however, say that the balance on primary income stood at negative $5.561 billion against $4 billion last year.

This new cumbersome equation, however, has come with the hope that the country might be able to bring down the overall deficit to below $1 billion during the July-March period of FY24. The finance minister, after having parleys with stakeholders and lenders in Washington, pointed out that the forex reserves may hit $10 billion soon, rolling out a snowball reaction in investments and buoyed trade. But there is an inbuilt flip side too. This surplus balance-sheet is an outcome of economic engineering, coupled with a slowdown in industrial output. It could lead to more job losses and make life miserable for all those who are living around the poverty line.

The silver-lining, nonetheless, has many reasons behind it apart from a catch-up with the Fund. The renewed Saudi and Chinese interest in FDIs and petro-energy industrial units has enabled commercial banks to extend more financing to traders, leading to an increase in import of goods by 7%. Moreover, the government is looking forward to hitting a zero-current account deficit, creating space for launching Eurobonds to the tune of $300 million in Chinese markets. This indexing, however, is fraught with consequences and an eye has to be kept on retaining the confidence of big-business by ensuring political stability.

Published in The Express Tribune, April 24th, 2024.

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