Pakistan’s Economy: Deficit Narrows, Record Remittances, Lower Inflation in May 2024

Staff Report
Pakistan recorded a Current Account Deficit (CAD) of US$270 million in May 2024 after three straight months of surplus. The higher CAD is mainly due to a higher primary deficit, which is almost a billion dollars higher than the monthly average of the first ten months.Pakistan Economy FY24: GDP Grows 2.38%, Agricultural Sector Hits 18-Year High

In a post-MPC briefing in May 2024, the Governor also mentioned that they alone paid over a billion dollars in May 2024 on account of profit/dividend repatriation. This brings the 11MFY24 Current Account Deficit to US$464 million, compared to US$3,765 million in 11MFY23.

In May 2024, Pakistan recorded its highest monthly remittances of US$3.24 billion, up 54% YoY and 15% MoM. For 11MFY24, foreign remittances have totaled US$27 billion, up 8% YoY. Alongside Eid-related inflows, the higher remittances in May 2024 and 11MFY24 (+54% YoY and +8% YoY, respectively) can also be attributed to a significant surge in Pakistanis who emigrated to other countries in the last two years (2022/2023), averaging 850,000 people versus an average of 323,000 between 2017 and 2021.

Foreign exchange reserves of the country in May 2024 were up 3% MoM to US$14.2 billion. However, reserves held by the State Bank of Pakistan (SBP) remained almost unchanged month-on-month at US$9.1 billion.

Pakistan’s CPI inflation stood at 11.8% YoY in May 2024, the lowest reading in 29 months, compared to 17.3% in April 2024. This was better than the industry expectation of 13.7%, according to a Bloomberg survey. On a MoM basis, CPI inflation witnessed a significant decline of 3.2 percentage points, driven by a 783 basis points decline in food prices, followed by 163 basis points in transport and 133 basis points in housing, water, and electricity segments. This brings the 11MFY24 CPI reading to 24.52%.