State Bank of Pakistan released the current account data for the month of March today. Current account deficit came out to be $6 million in March’20, a decline of 99% Y/Y and 97% M/M.
Major contribution in this decline came from the dip in Balance of Trade deficit. BOT deficit contracted by 29% Y/Y from $2.3bn in Mar’19 to $1.6bn in Mar’20. On the other hand, increase in inbound remittances by 9% Y/Y in Mar’20 ameliorated the current account balance.
In the recent SBP’s meeting with the Analysts, Governor exhibited comfort over the Current Account, given the larger decline in Oil and Non-Oil imports. We should expect the currency to remain stable near Rs 160-165 range and Current Account to remain in near balance/mild surplus for next month.
On the contrary, it is important to keep in mind that Pakistan receives around 30% of its remittances for Saudi Arabia and GCC countries. These countries are hit badly due to oil slump and that could potentially mean layoffs which could potentially translate into lower remittances. According to World Bank projections, Pakistan can potentially see a decline in remittances by 23% in FY20.