PAKISTAN ECONOMY

ASSIGNMENT#03

MARIYAM REHAN
190201(BBA-IV)
 How Pakistan's current account deficit is in the surplus from the last few months. Find
out the reasons, Why Pakistan's current account deficit is in surplus?
Frame last two to three months, Pakistan’s account deficit has recorded surplus. Before jumping
to the reasons which changed account’s deficit in surplus. We should first know about account
deficit and surplus.
• Account surplus:
When a country’s exports exceeds its imports then a country’s account is in urplus.it represent
ante inflow of domestic currency from foreign markets.it can increase employment and growth
ate but it also causes increase in interest rates.

• Account deficit :
When country’s imports exceeds its imports then country’s account is said to be in defecit.an
account deficit shows negative net sales abroad. A deficit occurs when expenses exceeds revenuers
or liabilities exceed assets.
Trade balance = total value of exports-total value of imports
• If the trade balance is positive then there is account surplus
• If it is negative then there is account deficit.
The account surplus or deficit mainly occurs due to three things:
• Exports
• Imports
• Remittances
Because these three tells us about the country’s economic growth.
Pakistan Kuwait Investment Company (PKIC) Head of Research and Development Samiullah
Tariq said “The surplus is in line with market expectations. It has been achieved for the second
successive month after a gap of nine years. Last time, it had happened in March-April 2011,”
According to the State Bank of Pakistan, the current account had a surplus of $297 million in
August, compared to a surplus of $508 million in July. The current account remained profitable in
August, with a current account balance of 297 million in August 2020. The dollar was surplus, the
current account balance surplus for the second year in a row.
However, Pakistan’s account is in surplus it is clear that exports have increase while imports are
less than exports.
However, main reason which contributed in changing account deficit into surplus are:
• The remittances from Pakistanis living abroad increased.
• Lower import costs.

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 • Flexible exchange also contributed in improvement of current account balance.
• Remittances increased 31% to $4.8 billion in two months of fiscal year 2021.
• 2% GDP growth has been projected by central bank as compared to the contraction in
previous fiscal year.
• The increase in exports went up 19.7% in July as corona cases dropped in Pakistan and
many course i.e.; UAE started importing from Pakistan.
• Sharp decrease in imports, which fell from $19bn to $14.65bn.
• Improvement in trade bills
• Imports of goods dropped almost 13% to $6.73 billion
• Decline in trade deficit of services and increase in other current transfers (remittances
received through currency dealers) helped to turn the current account balance into a
surplus from deficit.

Due to the huge value of surplus resulted from the above mentioned reasons, it is likely the current
account will remain in surplus for the next couple of months whereas on a month-to-month basis
it may go into deficit as imports will increase.
“The economy is estimated to record a current account deficit of $3-4 billion or around 2% of
GDP in FY21”