EUR 3.72 For Business Accounts Only

Pakistan Economy: Fx reserves under pressure amid soaring trade deficit

• Pakistan’s trade deficit in Apr’17 turned out to be US$3.2bn, up 52%YoY, taking 10MFY17 deficit to US$26.6bn, up 40%YoY. Exports in Apr’17 rose by just 5%YoY to US$1.8bn (down 2%YoY in 10MFY17), clearly not enough to override the 31%YoY surge in imports during month under review (up 20%YoY in 10MFY17). Major contributors to increased imports include Food, Autos, Petroleum, and Machinery.

• Pakistan’s current account deficit for Mar’17 clocked in at US$562mn, which takes 9MFY17 total deficit to an 8yr high of US$6.13bn (up 161%YoY; 2.6% of GDP). GoP’s recent move to borrow up to US$600mn from two Chinese banks is a clear move to address short term Fx reserve concerns (down US$3.2bn in 4m).

• Remittances in Apr’17 fell by 7%YoY, led majorly by a drop in flows from Saudi Arabia (down 10%/7%YoY in Apr’17/9MFY17). Recent rebound in flows from the US and UAE is encouraging, however. Current run rate suggests that remittances should close FY17F at c. US$19.5bn, not enough to compensate for the soaring imports.