The figures of the external balance of payments of Pakistan have been released recently by the SBP for February 2025 and for the first eight months of 2024-25.

There has been a positive declaration of the success in generating a surplus in the current account of the balance of payments. However, an overall focus on transactions, especially in the financial account, does not reveal such a strong position and, in fact, highlights some increasing vulnerability.

The objectives of this article are, first, to highlight the factors which have contributed to a surplus in the current account. Second, there is need to identify why despite the surplus, foreign exchange reserves have declined somewhat since December 2024. This will require an analysis of recent developments in the financial account of the balance of payments.

The cumulative current account surplus over the period, July to February, 2024-25, is $691 million in comparison to a deficit of $1,730 million in the corresponding period of 2023-24. This is in sharp contrast to the actual simultaneous occurrence of a larger deficit in the balance of trade in goods and services.

This trade deficit has risen to $18,753 million during 2024-25. It is higher by almost $3 billion, equivalent thereby to an increase of almost 19%. The question then is how has a surplus been generated in the current account? The answer lies in the phenomenal growth in remittances of $5,885 million with an unprecedented rate of increase of 32%.

An examination of the individual........

© Business Recorder