Following 19 per cent lower remittances, 5 per cent drop in exports and absence of Coalition Support Funds (CSF) the current account slipped further to a deficit of $347 million in Oct 2014 against Sept 2014 deficit of $79 million.

Statistics show that overall Balance of Payments (BoP) booked a $308 million deficit in Oct 2014 versus a surplus of $394 million in Sept-2014. While overall 4MFY15 C/A deficit stands at $1.8 billon versus $1.4 billion in the corresponding period last year. The difference is primarily due to 10 per cent YoY higher import of goods, despite 15 per cent higher remittances annually. However, improvement in Financial Account to $1 billion in 4MFY15 from $0.2 billion in 4MFY14 on account of higher loans received ($1.2b) led to reduction in Balance of Payment (BoP) deficit by 58pc YoY to $641m in 4MFY15.

According to financial experts, Pak macro indicators have recovered in recent months; particularly the outlook on the external account and Pak Rupee (PKR) exchange rate. C/A is expected to receive some respite from the recent fall in international oil prices (though partially to be offset by lower exports); impact of which we believe is yet to fully reflect. The position of other inflows has changed over the past few weeks as well where Pakistan is expected to (1) receive $1.1b from the IMF, (2) raise $0.5-1b from Sukuk issue and (3) generate $1b from share sales in ABL and HBL.

Altogether, it is expected that these developments to play out in favour of PKR stability.

Though Pakistan needs substantial and consistent accumulation of reserves as opposed to one-off inflows to address the risks to the external accounts, it is believed that at least for the medium term, the rupee exchange rate will remain stable.

According to experts, the sustainability of balance of payment surplus in FY15 will be contingent to timely realisation of financial flows where successful conclusion of staff level discussion with IMF has already built-in an expectation of materialisation of $1.1b, unlocking fresh loans from other lending agencies. In addition, govt has planned to launch $500m worth of Sukuk where it may potentially surpass envisaged amount due to booming global Sukuk market. Moreover, with reform agenda expected to be on track, experts believe FDI may also witness improvement in FY15 to $2b where recovery in foreign investments will be subjected to resolution of energy and security concerns.

Despite 5pc YoY increase in C/A deficit to $1.3b, they expect pressure on C/A deficit to ease off in remaining months of FY15 due to i) significant decline in crude oil prices (down 33pc FYTD), likely to reduce oil import bill (contributing 45pc in total imports) by $1.5-2b in FY15, ii) robust growth in foreign remittances, expected to clock in at $17.5b (up 11pc YoY).

 In the wake of expected financial flows coupled with potential decline in C/A deficit, its is expected overall BoP to post surplus of $4.3b in FY15, taking SBP reserves to cross $13.5b by Jun 2015 thus further strengthening USD-PKR parity rate.