KARACHI: The country’s current account sharply declined by 65 percent in January 2021 compared to December 2020. For the second consecutive month, Pakistan’s external account posted a deficit, however, current account deficit in January 2021 was lower than December 2020.
Pakistan's current account registered a deficit of $229 million in January 2021versus $652 million in December 2020, fell 65 percent MoM. The current account deficit in January 2021 is also some 55 percent lower than January 2020, in which deficit was $512 million.
Overall, current account for the first seven months of FY21 was remained in surplus. The country’s current account was in surplus amounted to $912 million during July to Jan of this fiscal year (FY21) as against deficit of $2.54 billion during the same period of last fiscal year (FY20).
According to SBP, compared to December 2020, exports grew steadily while remittances continued their record expansion in January 2021. In addition, imports of wheat and sugar to address domestic shortages, and palm oil, were significantly higher. While, machinery imports continued to grow at double-digits, reflecting economic recovery.
The SBP reported that collective deficit of goods trade, services and income stood at $17.917 billion in first seven months of FY21 as against $17.103 billion in the corresponding period of FY19.
With higher inflows of home remittances, the outlook for the external sector has already improved. As per SBP projections, current account deficit is expected to be in the range of 0.5-1.5 percent of GDP compared to previous estimates of 1.0 to 2.0 percent of GDP. The revision is mainly due to an upward adjustment in workers’ remittances, which are now expected to be in $ 24-25 billion during this fiscal year.
It may be mentioned here that Furthermore, the surplus in the surplus current account has not only eased the pressure on external debt management, but also provided an opportunity to build the country’s depleting foreign exchange reserves.
Copyright Business Recorder, 2021