AKD Securities Limited Equity Research – Daily Report

Karachi, March 18, 2019 (PPI-OT): Pakistan Economy: CAD improves, but don’t let your guard down

External account continues to exhibit significant improvement, with the recent monthly data (i.e. Feb’19) showing noticeable decline in CAD by 73%YoY/56%MoM to US$356mn. The marked reduction in deficit primarily stems from narrowing trade deficit, with the ‘February Effect’ also playing its part.

The trade imbalance continued to recede, narrowing 27%YoY/22%MoM to US$1,651mn in Feb’19. This moderation in trade deficit was imports driven, down 18%YoY/21%MoM, reflecting general slowdown in the economy. On the other hand, exports remained disappointing recording 9%YoY/19%MoM decline.

Overall, 8MFY19 CAD now stands 23%YoY lower at US$8,844mn, averaging monthly deficit of US$1,105mn vs. US$1427mn in 8MFY18. Contraction in trade deficit (both goods and services) and growth in workers’ remittances pulled the deficit lower.

While import led contraction in CAD is encouraging – at least in the short term, we are concerned about dismal exports performance, which remained stagnant despite 24% currency depreciation and export incentives.

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