REP-300

Pakistan Economy
Current Account posted a surplus after 6 months
17-Jan-2024

Best Securities House: 2023

Best Investment Bank: 2022 Best Equity House: 2022 Best Equity Advisor: 2021
Best Investment Bank: 2023

AHL Research
D: +92 21 32462589
UAN: +92 21 111 245 111, Ext: 248
Best Brokerage House: 2023
F: +92 21 32420742 Corporate Finance House: 2023
Best Economic Research House: 2023 Top 25 Companies Excellence Award Best Money Market Broker
E: research@arifhabibltd.com Best Equity Sales Person (Runner up): 2023 (2019, 2018 & 2017) Leading Brokerage House for RDA 2021 (Islamic) 2021
Balance of Payment
CA posts a surplus of USD 397mn during Dec’23
• In Dec’23, the Current account demonstrated a surplus of USD 397mn, a Exhibit: Pakistan's Balance of Payment
notable shift from the USD 365mn deficit recorded in Dec'22. (USD mn) Dec-23 Dec-22 YoY Nov-23 MoM 1HFY24 1HFY23 YoY
Exports (Goods) 2,799 2,308 21% 2,724 3% 15,289 14,223 7%
• On MoM basis, overall imports experienced a 6.1% decline in Dec'23, while total
exports showed a significant 5% MoM increase. Additionally, remittances rose Imports (Goods) 4,092 4,247 -4% 4,442 -8% 25,241 29,589 -15%

by 5.3% MoM. Trade Balance (Goods) (1,293) (1,939) -33% (1,718) -25% (9,952) (15,366) -35%

Exports (Services) 727 781 -7% 631 15% 3,766 3,870 -3%
• The surplus was primarily driven by a 14% YoY uptick in overall exports and a
13% YoY surge in remittances, while imports saw a marginal 0.1% YoY decline. Imports (Services) 882 734 20% 857 3% 5,196 4,140 26%
Trade Balance
(155) 47 nm (226) -31% (1,430) (270) 430%
• In the 1HFY24, the Current Account Deficit (CAD) decreased by 77% YoY to USD (Services)
831mn, a substantial improvement from the USD 3.6bn deficit recorded in the Trade Balance (1,448) (1,892) -23% (1,944) -26% (11,382) (15,636) -27%
same period last year. Balance on Pri. Income (753) (680) 11% (514) 46% (3,738) (2,631) 42%

Balance on Sec. Income 2,598 2,207 18% 2,443 6% 14,289 14,638 -2%
Exhibit: Current Account Surplus clocked in at USD 397mn during Dec’23
Income (Net) 1,845 1,527 21% 1,929 -4% 10,551 12,007 -12%
Trade Deficit Current Account Deficit (RHS) Remittances 2,381 2,100 13% 2,259 5% 13,435 14,418 -7%
(USD bn) (USD bn)
5.3 3.0 CAB 397 (365) nm (15) nm (831) (3,629) -77%

4.5 FDI (207) 898 -123% (127) 63% (833) 329 -353%
2.3
Financial Account (1,163) 1,972 nm 361 -422% (4,276) 726 -689%
3.8
1.5
Capital Account 15 258 -94% 19 -21% 88 317 -72%
3.0
0.8 Overall Balance (1,479) 2,292 nm 540 nm (3,006) 4,284 nm
2.3
- Source (s): SBP, AHL Research
1.5

0.8 (0.8)

- (1.5)
Dec-23
Oct-21
Nov-21
Dec-21

Apr-22

Jun-22

Oct-22
Nov-22
Dec-22

Apr-23

Jun-23
Jul-23

Oct-23
Nov-23
Jul-21

Jul-22
Sep-21

Feb-22

Sep-22

Feb-23

Sep-23
Aug-21

Aug-22

Aug-23
Jan-22

Mar-22

May-22

Jan-23

Mar-23

May-23

Source (s): SBP, AHL Research

2
Page 07
Balance of Payment
Dec’23: Imports (-0.1% YoY), Exports (+14.1% YoY)
Imports:
• In Dec'23, the aggregate imports (comprising goods and services) decreased by 6.1%
compared to the previous month, amounting to USD 5.0bn. Furthermore, the YoY comparison
for Dec'23 indicates a marginal 0.1% decline in total imports compared to the SPLY.
• In Dec'23, there was a 3.6% YoY reduction in the import of goods. Also, when examined on a
MoM basis, goods imports experienced a more pronounced 7.9% decrease.
• The import of services in Dec'23 exhibited a 20.2% YoY growth. Nevertheless, on a MoM basis,
there was a 2.9% increase in the growth of services imports.
• Consequently, during the 1HFY24, the overall imports recorded a substantial 9.8% YoY decline,
amounting to USD 30.4bn.
• Categorically, the import distribution during the 1HFY24 was as follows: Petroleum group (USD
7.4bn), agriculture & other chemicals (USD 4.5bn), food group (USD 3.5bn), and machinery
group (USD 3.1bn).
Exports:
• In Dec'23, the combined exports (including goods and services) demonstrated a 5.1% increase
compared to the preceding month, reaching USD 3.5bn, up from USD 3.4bn in Nov’23.
• On an annual basis, total exports in Dec'23 exhibited a notable 14.1% increase compared to
the corresponding period last year when it amounted to USD 3.1bn.
• The export of goods experienced a substantial 21.3% YoY increase in Dec'23. Additionally,
during the same period, there was a 2.8% MoM increase in goods exports.
• In Dec'23, the export of services witnessed a 6.9% YoY decline and a 15.2% MoM increase.
• Consequently, during 1HFY24, total exports recorded a 5.3% YoY uptick, totaling USD 19.1bn.
• In Dec'23, the monthly technology exports increased by 17% MoM and 23% YoY, reaching USD
303mn. Moreover, during the 1HFY24, technology exports amounted to USD 1,455mn,
contributing 39% to the overall services' exports and marking a 9% YoY increase.

3
Page 07
Balance of Payment
Imports down by 0.1% YoY during Dec’23

Exhibit: Historical Trend of Monthly Imports Exhibit: Imports down by 10% YoY during 1HFY24

Imports of Goods Imports of Services YoY (USD bn) Imports of Goods Imports of Services YoY
(USD bn)
6.0 10% 45.0 60%

40.0 50%
0% 6.4
5.0
0.8 0.9 35.0 40%
0.8 0.8
0.8 0.9
0.7 0.7 1.0 -10% 4.1
0.7 0.6 30.0 5.6 30%
4.0 6.2
5.0
0.7 -20% 25.0 5.0 4.2 20%
4.4 5.1
4.3 3.9 4.4
3.0 4.1
20.0 10%
-30% 35.4
4.3 4.4 4.4 15.0 0%
2.0 4.2 4.0 4.1 29.6
3.9 3.9 3.9 3.7 26.4 27.5
3.6 -40% 25.4
3.2 22.1 20.6 21.7 23.3 23.8
10.0 20.0 20.1 21.1 -10%
1.0
-50% 5.0 -20%

- -30%
- -60%

1HFY24
1HFY12

1HFY13

1HFY14

1HFY15

1HFY16

1HFY17

1HFY18

1HFY19

1HFY20

1HFY21

1HFY22

1HFY23
Apr-23

Jun-23

Nov-23

Dec-23
Jul-23

Oct-23
Feb-23

Sep-23
May-23

Aug-23
Jan-23

Mar-23

Source (s): SBP, AHL Research Source (s): SBP, AHL Research

4
Page 07
Balance of Payment
Exports increased by 14.1% YoY during Dec’23

Exhibit: Historical Trend of Monthly Exports Exhibit: Exports up by 5% YoY during 1HFY24

(USD bn) Exports of Goods Exports of Services YoY (USD bn) Exports of Goods Exports of Services YoY

4.0 20% 20.0 30%

15% 18.0 25%

3.5 3.5 3.7
10% 16.0 3.9
0.7 20%
3.0 0.5 0.6
0.6 5% 14.0 4.2
0.7 0.6 2.4 2.9 2.9
0.6 2.7 2.9 3.0 2.9 15%
2.5 0.7 0.6 0% 2.9
0.6 0.6 12.0 2.5
0.5
10%
-5%
2.0 10.0
-10% 5%
8.0 15.3
15.2
1.5 -15% 14.2 0%
2.8 2.7 2.8
2.6 2.5 6.0 12.1 12.2 12.5 12.2 11.8 11.9 12.4 11.8
2.4 2.4 10.8 10.6
2.2 2.2 2.1 2.1 2.1 -20%
1.0 -5%
4.0
-25%
0.5 2.0 -10%
-30%
- -15%
- -35%

1HFY12

1HFY13

1HFY14

1HFY15

1HFY16

1HFY17

1HFY18

1HFY19

1HFY20

1HFY21

1HFY22

1HFY23

1HFY24
Jun-23

Nov-23

Dec-23
Jul-23

Oct-23
Feb-23

Apr-23

Aug-23

Sep-23
Jan-23

Mar-23

May-23

Source (s): SBP, AHL Research Source (s): SBP, AHL Research

5
Page 07
Balance of Payment
Dec’23: Remittances (+13.3% YoY), FDI (+6.4x YoY)
Remittances:
▪ Remittances from overseas Pakistanis saw a 5.3% MoM increase, reaching USD 2.4bn in Dec'23
compared to USD 2.3bn in Nov'23. On a YoY basis, remittances increased by 13.3% (Dec'22: USD
2.1bn).
▪ In the 1HFY24, remittances experienced a 6.8% YoY decline, amounting to USD 13.4bn, as
compared to USD 14.4bn in the 1HFY23.
▪ In Dec'23, remittance inflows from Saudi Arabia amounted to USD 578mn, showing a YoY
increase of 9% and a MoM increase of 6%. Remittances from the UAE stood at USD 419mn in
Dec'23, reflecting a YoY jump of 27% and a MoM increase of 2%. The UK contributed USD
368mn in remittances during Dec'23, experiencing a YoY increase of 15% and a MoM increase
of 6%. Remittances from the USA totaled USD 264mn in Dec'23, reflecting a YoY increase of 8%
and a 1% MoM increase.
Foreign Direct Investment:
▪ The country observed a net Foreign Direct Investment (FDI) of USD 211mn in Dec'23, marking a
remarkable 6.4x YoY increase compared to the net inflow of USD 33mn in Dec'22.
▪ In the 1HFY24, net FDI surged by 35% YoY to USD 863mn, contrasting with an inflow of USD
640mn in the 1HFY23.
▪ China emerged as the leading contributor to net FDI during the 1HFY24, recording a net FDI of
USD 293mn, closely followed by Hong Kong with a net FDI of USD 191mn during the same
period.
▪ The power sector attracted the most significant investment during the 1HFY24, totaling USD
434mn.
▪ The oil and gas exploration sector received an investment of USD 130mn during the same
period.

6
Page 07
Balance of Payment
Remittances up by 13.3% YoY during Dec’23

Exhibit: Historical Trend of Monthly remittances Exhibit: Remittances down by 6.8% YoY during 1HFY24

(USD bn) Remittances YoY (USD bn)

Remittances YoY
2.6 20% 18.5 30%
2.5

2.5 2.5 15% 16.5 15.8 25%

2.4 10% 14.2 14.4

2.4 14.5 13.4 20%
5%
2.3 2.3 12.5 11.4 15%
0% 11.0
2.2 2.2
2.2
2.2 -5% 10.5 9.7 9.5 9.8 10%
9.2
2.1 2.1
2.1 -10% 8.5 7.8 5%
2.0 7.1
2.0 -15% 6.3
2.0 6.5 0%
1.9 -20%
1.9 4.5 -5%
-25%
1.8 2.5 -10%
-30%

1.7 -35% 0.5 -15%

1HFY12

1HFY13

1HFY14

1HFY15

1HFY16

1HFY17

1HFY18

1HFY19

1HFY20

1HFY21

1HFY22

1HFY23

1HFY24
Jun-23

Nov-23

Dec-23
Jul-23

Oct-23
Feb-23

Apr-23

Sep-23
May-23

Aug-23
Mar-23
Jan-23

Source (s): SBP, AHL Research Source (s): SBP, AHL Research

7
Page 07
Balance of Payment
FDI up by 14% YoY during Dec’23

Exhibit: Historical Trend of Monthly FDI Exhibit: FDI up by 35% YoY during 1HFY24

(USD mn) FDI (USD mn) FDI

250 237
1,790
211 1,546
1,590
1,456
200 1,372
150 1,390 1,272
173
165 1,160
1,190
117 142
150
127 131
122 990 867
113 832
790
100 88 633 640
590 531 569 502
445
390
50
190

-
-10

1HFY12

1HFY13

1HFY14

1HFY15

1HFY16

1HFY17

1HFY18

1HFY19

1HFY20

1HFY21

1HFY22

1HFY23

1HFY24
Dec-23
Jun-23

Jul-23

Nov-23
Oct-23
Feb-23

Apr-23

Sep-23
Mar-23

May-23

Aug-23
Jan-23

Source (s): SBP, AHL Research Source (s): SBP, AHL Research

8
Page 07
Analyst Certification and Disclaimer – Neutral
Analyst Certification: The research analyst(s) is (are) principally responsible for preparation of this report. The views expressed in this research report accurately reflect the personal views of the analyst(s)
about the subject security (ies) or sector (or economy), and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views
expressed by research analyst(s) in this report. In addition, we currently do not have any interest (financial or otherwise) in the subject security (ies). Furthermore, compensation of the Analyst(s) is not
determined nor based on any other service(s) that AHL is offering. Analyst(s) are not subject to the supervision or control of any employee of AHL’s non-research departments, and no personal engaged in
providing non-research services have any influence or control over the compensatory evaluation of the Analyst(s).

Equity Research Ratings

Arif Habib Limited (AHL) uses three rating categories, depending upon return form current market price, with Target period as Dec 2024 for Target Price. In addition, return excludes all type of taxes. For
more details, kindly refer the following table;
Rating Description
BUY Upside of subject security(ies) is more than +15% from last closing of market price(s)
HOLD Upside of subject security(ies) is between -15% and +15% from last closing of market price(s)
SELL Upside of subject security(ies) is less than -15% from last closing of market price(s)

Equity Valuation Methodology

AHL Research uses the following valuation technique(s) to arrive at the period end target prices;
▪ Discounted Cash Flow (DCF)
▪ Dividend Discount Model (DDM)
▪ Sum of the Parts (SoTP)
▪ Justified Price to Book (JPTB)
▪ Reserved Base Valuation (RBV)

Risks: The following risks may potentially impact our valuations of subject security (ies);
▪ Market risk
▪ Interest Rate Risk
▪ Exchange Rate (Currency) Risk

Disclaimer: This document has been prepared by Research analysts at Arif Habib Limited (AHL). This document does not constitute an offer or solicitation for the purchase or sale of any security. This
publication is intended only for distribution to the clients of the Company who are assumed to be reasonably sophisticated investors that understand the risks involved in investing in equity securities. The
information contained herein is based upon publicly available data and sources believed to be reliable. While every care was taken to ensure accuracy and objectivity, AHL does not represent that it is
accurate or complete and it should not be relied on as such. In particular, the report takes no account of the investment objectives, financial situation and particular needs of investors. The information
given in this document is as of the date of this report and there can be no assurance that future results or events will be consistent with this information. This information is subject to change without any
prior notice. AHL reserves the right to make modifications and alterations to this statement as may be required from time to time. However, AHL is under no obligation to update or keep the information
current. AHL is committed to providing independent and transparent recommendation to its client and would be happy to provide any information in response to specific client queries. Past performance is
not necessarily a guide to future performance. This document is provided for assistance only and is not intended to be and must not alone be taken as the basis for any investment decision. The user
assumes the entire risk of any use made of this information. Each recipient of this document should make such investigation as it deems necessary to arrive at an independent evaluation of an investment
in the securities of companies referred to in this document (including the merits and risks involved), and should consult his or her own advisors to determine the merits and risks of such investment. AHL or
any of its affiliates shall not be in any way responsible for any loss or damage that may be arise to any person from any inadvertent error in the information contained in this report.