I said that this was a good sign in another thread, but this is only true really if the news is taken at face value and only good because we had a current account led financial crisis recently. However this should also be taken as a possibly worrying sign:
Let's get the facts stated first, this current account surplus is not something that developed organically as a result of export growth, remittances and a better trade balance (although the latter has seen some improvement). It is instead the result of two major factors; weak demand and weak internal GDP growth, and low crude prices. In fact, plenty of countries, not just us are seeing improving current account balances lately, even India is recording a surplus.
Have you notice how quickly we have went from having a trade deficit to a massive swing and now a surplus? In economics, this sort of quick reaction is called a 'shock', it means that this is due to underlying factors of supply and demand rapidly changing. This surplus did not result from new industries and exports opening up between the start of the outbreak and now. It's the result of covid related weakness internally due to lower demand (including lower demand for imports), and lower prices of crude. This is bad for us. Weak growth or recession can often be much worse than any perceived benefits in current account balance improvement, especially since let's say in FY20 CA surplus is 0.3%, but if the underlying conditions that caused it also cause the position to deteriorate due to weak remittances in the future also cause a significant recession and long term down turn in growth. Then the net effect of this balance as a % of GDP could be worse.
Also, if you look at low crude prices, this will help us lower import prices today, but it most adversely affects countries like Saudi, UAE etc. These same countries provide us a large proportion of our remittances. So the same time that we are gaining due to low prices, we could lose due to worse remittances from these nations. The differences is, the cost has not been seen yet. The price of crude can change immediately, incomes of expats and their remittances might only react negatively over the course of a few months or years.
Pakistan with a weak export base, and no industries of any serious size CANNOT sustain current account surpluses in the long run. You need big shifts in order to get there. And a better current account position in turn affords better growth.
So it's like this... ...if a poor man tells you that he used to spend USD100 per month on his and his family's upkeep, and now he spends USD80 per month and he does not need another 20 or is no longer borrowing 20 from a lender, you might see this as good. But if as a result he is starving himself and his family in the short term, his health might take a hit a few months down the line landing him with a larger hospital bill, or he might not be able to buy the bus ticket to work for extra money that he used to get to work to earn more, because the bus has stopped. Then he will also be materially poorer at the end as well as worse off despite lower expenditure.
This is may be the case for Pakistan's current account turnaround. These are just my 2 cents based on minimal assessment of actual figures.
