In September 2023, Pakistan’s current account balance came close to breaking even, with a deficit of just $8 million, surprising market expectations of a surplus. This marked a significant improvement, with the deficit plummeting by 95% compared to the previous month and a staggering 98% decrease compared to the same period last year when it stood at $360 million. Over the first three months of the fiscal year 2023-24, the current account deficit reduced to $947 million, a 58% decline from the previous year’s $2.26 billion.
Several factors contributed to this improvement, including a 19% decrease in imports, which reached $3.98 billion in September, and an 11% increase in workers’ remittances, totaling $2.20 billion. However, export earnings remained relatively flat.
While this reduction in imports helped narrow the current account gap, it also disrupted the supply of imported raw materials to industrial units, leading to production challenges and, in some cases, production stoppages. The government’s strategy to balance imports with export earnings and remittances aims to conserve foreign exchange reserves and maintain economic stability.
The low imports have put many jobs at risk, with the unemployment rate already approaching 10%, potentially pushing more households below the poverty line. Experts anticipate that Pakistan’s economy may stabilize in the second half of the fiscal year, with expected investments from Saudi Arabia and African investors and the sale of state-owned entities potentially bolstering the country’s financial situation.