Pakistan's current account deficit swells to $1.48 billion in August

Pakistan’s current account deficit (CAD) increased to $1.48 billion in August 21, a massive 81% month-on-month increase from $0.814 billion, showed data released by the State Bank of Pakistan (SBP) on Friday.

The current account posted a deficit of $1,476 million in August, as compared to a deficit of $814 million in July, as the import bill ballooned to over $6 billion in August.

“The recent rise in the current account deficit reflects both the strong domestic recovery and higher international commodity prices,” said the SBP.

Meanwhile, SBP’s foreign reserves rose to an all-time high of $20.1 billion in the month of August, as compared to $12.7bn in August the previous year, added the statement.

The widening deficit has put pressure on the currency that inched towards the 170-mark against the US dollar.

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“This $1.5bn Current Account deficit is dangerous but was expected after record imports in August,” said Mohammed Sohail, CEO at Topline Securities, in a tweet post.

He said domestic demand is also rising in Pakistan, urging the SBP and the Ministry of Finance to take fiscal and monetary steps on an urgent basis to control the rising CAD.

On a cumulative basis, Pakistan's current account balance during the first two months of FY22 stood at a deficit of $2.29 billion against a surplus of around $838 million recorded in the corresponding period last year.

Furthermore, Pakistan's rising imports, which has become a headache for policymakers, also showed no signs of slowing down in August, as total imports of goods and services shot up to $6.89 billion compared to $3.7 billion in August 2020, reflecting an increase of 86% YoY.

On a monthly basis, total imports inched up by 12% month-on-month, from $6.14 bn in July 21.

On the other hand, Pakistan's exports during the month of August stood at $2.88 billion, posting a yearly growth of 55%, as compared to $1.86 billion exports recorded in the same month of the previous year. On a month-on-month basis, Pakistan’s total exports inched up by 6% in August 2021 compared to $2.73 billion recorded in the month of July.