A general thread on improving Balance of Payments of Pakistan. There’s a perception amongst analysts and economists in Pakistan that the improvement in Current Account is due to lower imports. A massive USD5.1bn improvement has been witnessed in the Ca despite 9% growth in imprt

If you see the graph below, the credit entries in Balance of Payments have increased significantly, which means inflows against exports of goods & services and remittances have increased significantly

The export of goods has increased significantly and inflows under exports have been consistently higher than USD2billion with Mar-21 inflows have been higher than USD2.6bn, only lower than achieved in Jun 2011 (cotton prices touched an all time high during that year)

The growth in secondary income has been spectacular as remittances along with certain inflows under RDA are also counted under other current transfers. For the second time in Pakistan’s history, secondary income credit has breached USD3bn after Jul-20.

After incorporating all those credits, the country has been able to finance its second highest imports of USD5.2bn during Mar-21 and still post a meagre current account deficit of USD47mn

With a growing economy, imports are expected to grow, however, if the current trends of improvement in inflows against exports, remittances and services exports, then increasing economic growth shouldn’t be a problem. Moreover, these activities are not only financing imports

But are also supporting economic activities like exports of goods and services generates additional economic activities. Similarly, the incoming remittances are either used for consumption or investment which also generate economic activity

The governments duty is to shape its policies in a way that economic activity is generated while balance of payments is also supported, like increasing economic activity on the basis of exports (exports growing faster than gdp resulting in higher exports to gdp ratio

In absence of such rational policies, the country’s imports increase to unsustainable levels which might threaten country’s security and sovereignty as well as people’s life and purchasing power (due to threat of run on local currency)