Economic Trends and Targets Remittances have played a fundamental role in reducing the size of the current deficit. They have increased at the rate of 4 percent annually and now are even larger than exports of goods. During the current year, they have shown spectacular growth of 29 percent in the first ten months, despite the return of migrant workers after COVID-19. This may be attributable to less expenditure on travel, need for more support to families in Pakistan and to the shift in inflows from the hundi market to official banking channels. The first ten months of 2020-21 have witnessed for the first time after the first half of 2010­11 a current account surplus, with the magnitude of$0.8 billion. This is, of course, due to the phenomenal growth in remittances and limited growth in imports. The current account deficit has returned in December 2020 due particularly to larger imports of agricultural items, transport equipment and some intermediate inputs. The expectation now is that in the full year of 2020-21 there will be a small current account deficit. A new problem has emerged. While the current account deficit position has greatly improved the financial account of the balance of payments has worsened. It was in surplus last year of$10 billion in the first ten months, but it has now been reduced to$2.8 billion as shown in Table 1.5. Historically, financial account surpluses have not only enabled financing of the current account deficit but have also enabled a buildup of reserves of as much as $4.8 billion in 2019-20. The reasons for the big deterioration in the financial account are, first, a 38 percent decline in foreign direct investment. Second, the net inflow of assistance to the Government has decreased by 45 percent despite the deferment of debt repayment to the G-20 as a special relief measure after COVID-19. The IMF earlier also gave a loan of$1.4 billion from the Rapid Financing facility to minimize the negative impact of a fall in exports after COVID-19. Table 1.5: Trend in the Balance of Payments of Pakistan 2015-16 2016-17 2017-18 Current Account Surplus(+)/ Deficit(-) Exports* Imports Balance of Trade Remittances Financial Acct Surplus(+)/Deficit (-) Foreign Direct Investment Portfolio Investment Net Government Borrowing -5.0 22.0 41.1 -19.1 19.9 6.9 2.4 -0.3 3.4 -12.8 22.0 48.0 -26.0 19.3 9.9 2.4 0.3 5.0 -19.2 24.8 55.7 -30.9 19.9 13.6 2.8 2.2 4.9 2018-19 -13.4 24.3 51.9 -27.6 21.7 11.8 1.4 -1.3 4.2 ($ billion) 2019-20 2020-21 -3.0-1.8 22.5 42.4 -19.9 23.1 7.7 25.6 53.8 -28.2 29.4 8.2 2.5 1.8 -0.4 2.8 5.8 5.7 9