Pakistan's 10 month current account surplus at over US$ 700 million

Society Pakistan & World Affairs
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For all the critics who think Pakistan is a bankrupt country these figures are a revelation. We have 7 million overseas Pakistanis who are sending over a billion dollars per month through official channels, and a similar amount through unofficial channels to the country. Exports have crossed 2 billion dollars per month.

In spite of all the perception problems, Pakistan has posted a current account surplus. Just imagine if we clean our mess what potential the country has. We have 180 million strong consumer base. The rupee in spite of all the problems related with unwilling partner in the war against terrorism stayed strong during the past 10 months.

If only we are able to clean our house and focus on our economy.. and somehow curb the terrorist from making our country a safe haven.. can you imagine how strong are the basic fundamentals of our economy. Investors all over the world are looking for these potential economies to take positions for next 30/40 years.

http://e.thenews.com.pk/5-18-2011/page15.asp#;

Pakistan’s July-April current account surplus at $748 million

Shahnawaz Akhter
KARACHI: Pakistan posted a current account surplus of $748 million during the first 10 months of the current financial year against a deficit of $3.456 billion in the corresponding period a year ago on the back of a sharp rise in home remittances from overseas Pakistanis and export receipts.
The provisional figures issued by the State Bank of Pakistan on Tuesday revealed that the current account surplus was at $716 million in April alone from the previous month’s surplus of $230 million.
Analysts attributed the current account surplus to significant rise in remittances sent home by overseas Pakistanis and export receipts received during the period.
In April, the country received over $1 billion remittances for the second consecutive month. In the previous month, the country received highest-ever home remittances of $1.052 billion.
“The remittances sent home by Pakistani workers had already crossed the $9 billion-mark, which was the target in the Annual Plan for 2011 for the whole fiscal year,” the State Bank reported.
Overseas Pakistani workers had remitted an amount of nearly $8.906 billion during the last fiscal year, the central bank said.
Similarly, the exports have shown substantial growth as the receipts for the second consecutive month crossed $2 billion-mark in April.
The exports stood at $20.15 billion in July-April 2011, showing a growth of 27.78 percent against $15.77 billion in the corresponding period last year.
After witnessing phenomenal growth in both the heads, the government is now estimating to have record exports of $24 billion and remittances of around $11 billion during the current fiscal year.
The trade balance, the major component of the current account, posted a deficit with minor changes of $12.109 billion during the first 10 months of the current fiscal year against $12.349 billion in the corresponding period last year.
In the financial accounts, the foreign direct investment continue continued to register decline as it fell by 28.6 percent to $1.232 billion during the period under review from $1.725 billion in July-April 2010. However, investment made in the capital markets has seven times growth to the inflows of $302 million against the outflows of $46.5 million. Thus, the net inflows came down by 8.6 percent to $1.534 billion against $1.678 billion.
Experts said that the current account surplus would help the rupee further gain against the dollar.
Recently, the rupee appreciated to 11-month high against the dollar, but after the killing of Osama bin Laden the dollar appreciated in the international market, which depressed the local currency during the last week.
The experts, however, remained cautious about sustainable remittance inflows and export receipts and said that the current fiscal year would end with current account in deficit.
The remittances are increasing due to unrest in the Arab world as expatriate Pakistanis are sending their savings to homeland, an analyst said.
Similarly, the exports posted growth due to rise in prices of commodities in the international market, the analyst added.
The country posted the current account deficit of $3.946 billion in 2010, down from $9.261 billion in 2009.

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Re: Pakistan's 10 month current account surplus at over US$ 700 million

good to hear some positive thing out of all the negativity surrounding Pakistan these days

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Re: Pakistan's 10 month current account surplus at over US$ 700 million

and still we cant produce electricity .......its of no use

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Re: Pakistan’s 10 month current account surplus at over US$ 700 million

Malik say something else

Rehman Malik is Interior Minister of Pakistan with business Interest in UK, this is what he has to say about Pakistan

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Re: Pakistan's 10 month current account surplus at over US$ 700 million

^^^

If only these clowns could manage the country better..

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Re: Pakistan's 10 month current account surplus at over US$ 700 million

^^ I hear what u say!!!

With billions of dollars flowing in as remittance, Pakistan should have been in lot more better shape but the miss-management which govt. adopted have offset the benefits, still not too late, they can improve but that is conditioned to the motives and intentions...

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Re: Pakistan's 10 month current account surplus at over US$ 700 million

Growth forecast over 2%.

The problems that our nation is facing are second to none, but despite all the mayhem we manage to post positive growth. Simply amazing! Our nation has time and again shown how resilient they are. Sooner or later we WILL have some sane leaders, honest, hardworking and with a vision. IA we are going to get our rightful place in the world!

Long live Pakistan!

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Re: Pakistan's 10 month current account surplus at over US$ 700 million

I think Pakistanis have to learn simple maths and should know how economy works. We also have to choose people to lead not on basis of how long their beard measures, what they wear and talk, what they do in their spare time, which ethnicity they belong to, what party they are associated with, what is their way of life, or who they are, but on basis of what abilities they have to improve Pakistani economy.

We should realise that a corrupt person could not improve country’s economy, neither a man who or whose family and friends are involved in businesses when they are running the country.

We also have to learn to appreciate what people have done for Pakistani economy when they were given chance, and judge them on that basis rather than on personal like and dislike due to petty reasons of religion, ethnicity, sectarianism, or provincialism. If Pakistanis would not learn to do that then it would be disastrous for future of Pakistan.

Now coming to GDP growth rate, loans and remittances:

Pakistan population is increasing at the rate of around 2 percent yearly. Anyhow, the number of working age population is increasing at the rate of 3 to 4 percent, as their increase depends on birth rate 18 to 25 years ago. That means, for Pakistanis to have constant earning level (increase in earning equals price rise), Pakistan economy has to grow at least at the rate of 3 to 4 percent.

[We should remember that, in a country where population growth rate is constant (most western countries), GDP growth rate equal to increase in population growth rate is essential to maintain overall living standard, but that is not true where population growth rate is decreasing (third world countries, including Pakistan)]

Calculation [for ease I am using 100 people as population, Rs 100,000 as average earning per person, inflation 10 percent, increase in working age population 3 percent (Pak case is 3 to 4 percent), and GDP growth rate 2 percent (Pak case)]:

Year 1: 100 people earning Rs 100,000 = Rs 10 million

Year 2:
Inflation = 10 percent than Rs 100,000 of year 1 = Rs 110,000 in year 2.
GDP Growth = 2 percent

Increase in working age population = 3 percent ... that means there are 103 people of working age in year 2 compared to every 100 in year 1.

To keep pace with inflation (no improvement), earning should be:
103 people earning 110,000 = Rs 11.33 million (just to keep up with inflation)

Thus real growth needed to have same earning value for workers = (11.33 divided by 11) multiplied by 100 = 3 percent.

So, for earning of workers to just keep pace with inflation, Pakistan has to have real growth of at least 3 to 4 percent (since working population is increasing at the rate of 3 to 4 percent). To have improvement in life, Pakistan needs around 5 to 6 percent growth. For a poor country like Pakistan, average GDP growth needed is at least 7 percent to have meaningful improvement in life.

Remittances: Pakistan government needs revenue to function and prosper properly (or politicians to steal). When expat workers remit money to Pakistan, they get equivalent of that remittance in rupees. Thus, remittances do not increase revenue of government.  Remittances only increase purchasing power of those receiving the remittances.

Loan: When government borrow dollars, they convert that into rupee same way as people sending dollars to their family members. Government use rupees due to conversion of dollars in running the country. When rupee devalues, government loses out as government debt increases.

Government also borrows rupee denominated loan, but borrowing locally causes increase in rupee interest rate (due to supply and demand). When government borrows excessively to spend, it fuels inflation.

When we see interest rate in Pakistan falling, it means government demand for rupee loan has decreased (government living within their means without borrowing, prudently) and when that happens, economy improves and inflation reduces.

On the other hand, if government borrows and spend that money properly without corruption, then that would result economic growth. Thus, borrowing to invest on future of country is not bad, but that should only happen when country’s GDP growth is increasing at good pace.

How remittances help?
Remittances help as it keeps the exchange rate within control. Anyhow, best way to control exchange rate is not remittances but export and invisible earnings from abroad. FDI also helps keep exchange rate stable.

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Re: Pakistan's 10 month current account surplus at over US$ 700 million

words..

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Re: Pakistan's 10 month current account surplus at over US$ 700 million

The only footnote I can add to your post is that inflation has become a global phenomenon. In today's scenario inflation can not be termed as a local factor. Even a farmer growing vegetables for you would not grow the vegetables unless he gets equal opportunity benefit for his land when he grows exportable crops like cotton and rice.

Furthermore a strong currency due to the above mentioned factor helps to curb the inflation in this global pricing regime..