Pakistan April C/A surplus shrinks 99% YoY but stays above forecasts

• Smaller surplus attributed to higher goods imports, lower exports.
• Year-on-year, the current account surplus fell by 96%, as per SBP.
• Analysts had mostly expected the current account to be negative.
  

KARACHI: Pakistan posted a smaller current account surplus in April, narrowing from the previous month and the same period last year, but still outperforming expectations that had pointed to a deficit.

The current account surplus dropped to $12 million, a staggering 99% decrease from the previous month. Year-on-year, the surplus fell by 96%, data published on Friday by the State Bank of Pakistan (SBP) showed.

Over the 10 months leading up to April of the fiscal year 2025, the surplus reached $1.88 billion, showing a significant improvement from a deficit of $1.33 billion during the same period last year.

Most analysts had expected the current account to be negative, largely due to a monthly slowdown in remittances. The cash sent home by Pakistanis living abroad fell to $3.2 billion in April, a decrease of 22% from the previous month. 

However, remittances increased by 13% compared to last year. Inflows for the period from July to April in FY25 rose by 31%, totalling $31.2 billion.

The smaller surplus is primarily attributed to an increase in goods imports and a decline in goods exports. Analysts have also noted discrepancies in the trade data reported by the SBP and the Pakistan Bureau of Statistics (PBS).

According to PBS, the total trade gap was $3.43 billion, while the SBP reported a gap of $2.6 billion. In April, goods exports according to the PBS were $2.1 billion, whereas the SBP recorded exports of $2.6 billion for the same month.

In April, imports of goods rose by 18% year-on-year to $5.237 billion, compared to $4.44 billion in the same month the previous year. On a month-on-month basis, goods imports also increased by 6%.

“The current account posted a surplus, driven by strong remittance inflows, unusually low dividend and interest payments, and a decline in services imports,” said Awais Ashraf, the director of research at AKD Securities Limited.

“This improvement came despite imports exceeding this year’s average by 7% and exports falling 4% below the average,” Ashraf added.

Analysts believe that the current account will continue to remain in surplus for FY25.

“We expect the country to register a current account surplus of $1.6 billion in FY25, marking the first surplus after 14 years. This improvement is primarily attributable to a significant 24% YoY increase in workers’ remittances, which are expected to reach $37.4 billion during the year,” said Sana Tawfiq, the head of research at Arif Habib Limited, in a note.

The balance of payments data comes after Pakistan received the second tranche of $1.02 billion from the International Monetary Fund (IMF) as a part of a $7 billion loan programme. 

This disbursement has further bolstered the central bank’s foreign exchange reserves and reinforced macroeconomic stability, restoring more confidence in the rupee and the country’s external position.

The foreign exchange reserves held by the SBP stood at $10.40 billion as of May 9. According to the SBP, the disbursement of the IMF loan will be reflected in its reserves for the week ending on May 16.

Last week, the IMF finalised its first review of a 37-month loan deal it made with Pakistan last year, unlocking $1 billion for Pakistan. It also approved a new $1.4 billion loan to help the country deal with climate change.

Earlier this month, tensions rose between India and Pakistan, both nuclear-armed neighbours. But after talks and pressure from the United States, the two sides agreed to a ceasefire.