Current Account’s (another) surplus- $128m in Feb

Tightening at its best.

These risks on the current account are gone now for a while. With such a choking interest rate of 22%, demand for dollars has virtually collapsed as imports remain confined to $4.5Bsh levels. At this unsustainable interest rate, this is a fair level of imports.

I do not think a lot of administrative controls are placed on restricting imports of genuine value. SBP has kept gradually opening up the market by letting authorised dealers arrange dollars for imports without warranting SBP's permission. The lesser the permission requirements the fairer the trade balance and currency.

Of course, when interest rates fall to presumably natural interest rate of 13-16%, imports ought to increase but require more than the needed increase in exports, FDI and remittances.Right now, the pain of currency depreciation-induced inflation is so high that policymakers want a balanced current account. Gross external Debt repayments are huge already.

Pakistan perhaps does need a 1% current account deficit and a primary surplus of 2-3% of GDP for the next 10 years where growth will only come from exports, reducing SOE losses, increasing agri yields, growing IT base and widening tax net. The last 3 quarters have shown discipline 57 more to go. Currency seems balanced at PKR 280 until the new IMF program warrants another step-down.