Business Recorder
The current account is back in the red. It posted a deficit of USD324 million in April, compared to a surplus of USD1.1 billion in March. Overall, the current account recorded a modest deficit of USD252 million in 10MFY26, versus a surplus of USD1.7 billion in the same period last year. The notable number is imports, which stood at USD5.97 billion in April — the highest since August 2022. The increase is mainly due to rising oil prices, as energy-related import bills are surging. Although LNG imports remain much lower due to non-availability, overall imports are still reaching the dangerous levels seen in 2022. Given PBS imports of USD6.5 billion in April, it is expected that SBP’s import bill may hover around USD6.5 billion in May. The oil bill, with zero LNG imports, stood at USD1.8 billion — the highest since August 2022 — while petroleum product and crude imports are at record-high levels. The increase in imports is not confined to the oil bill. Transportation imports in April stood at USD397 million, the highest ever, although car sales are not at record levels. The share of high-value cars is growing, and CBU car imports stood at USD47 million, mainly due to the rising share of imported EVs, particularly BYDs. Growing imports are not a good sign, especially when exports are hovering at low levels. In the first half of 2022, exports were relatively higher, particularly textile exports. Later, in parts of 2024 and 2025, food exports performed well due to the one-off rice bonanza. Now, both food and textile exports are relatively weak. That is why the goods trade deficit is ballooning. It reached USD3.4 billion — the highest since June 2022. The goods trade deficit is up by 44 percent month-on-month and 29 percent year-on-year. The impact is partially diluted by better performance in the services trade balance, which remained in marginal surplus in both March and April. Services exports continue to maintain robust growth momentum, rising by 18 percent in 10MFY26 to USD8.2 billion. Both ICT and other business services exports are growing at over 20 percent. Combined, the two are up by 23 percent in 10MFY26 to USD5.6 billion — almost two-fifths of textile exports and significantly higher than food exports. Overall, the goods and services trade deficit is up by 22 percent to USD29.0 billion. Better services exports are therefore not enough to completely offset the impact of the growing goods trade deficit, which is up by 26 percent in 10MFY26 to USD26.9 billion. Goods imports stood at USD52.7 billion, up by 8 percent, while goods exports declined by 5 percent to USD25.8 billion in 10MFY26. The primary income balance remained almost unchanged, down by 4 percent to USD7.3 billion. The real gain is coming from inward home remittances, which continue to grow from a higher base. Remittances are up by 8 percent to USD33.9 billion in 10MFY26, with more than half coming from GCC countries. The growing tension in the Middle East is likely to weigh on the medium-term outlook for remittances, especially from the UAE. Pakistan’s economy is faring better in 2026 compared to 2022 largely due to the exceptional performance of home remittances. In 10MFY26, remittances are 46 percent, or USD11 billion, higher than in 10MFY23. Any dip in remittances, at a time of growing imports and stagnating goods exports, could be devastating. Hence, the balance of payments, and in turn the broader economy, depends heavily on how home remittances perform next year. The outlook is not rosy. That is why SBP has altered its monetary policy stance and increased the policy rate by 1 percentage point. It may raise rates further in the next policy review, as inflation is creeping up to 13–15 percent in May and June. However, SBP should also use the exchange rate as a second line of defense and allow the PKR to depreciate by a few percentage points to curb demand, especially in automobiles and other areas. The REER is already at 105.8 — the highest level since 2018. In a nutshell, a combination of higher interest rates, exchange rate depreciation and curbs on non-essential imports is very much on the cards in the next fiscal year. Things are getting tough.
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