4MFY22 YoY: Current account posts $5bn deficit on higher import bill

KARACHI: The country’s current account continued to deteriorate and posted over $5 billion deficit during the first four months of current fiscal year (FY22), mainly due to higher import bill.

Economists said rising commodity prices on international front and strong domestic activity kept the current account deficit elevated. “Rising goods import bill has largely contributed in the higher current account deficit,” they added.

The State Bank of Pakistan (SBP) Friday reported that current account posted $5.084 billion deficit in July-Oct of FY22 against $1.313 billion surplus in corresponding period of last fiscal year (FY21). The Monetary Policy Committee (MPC) of SBP sensing the risk to external account on Friday also increased key policy rate by 150 basis points to 8.75 percent.

On a month-on-months basis, the current account deficit widened to $1.66 billion in October 2021 compared to $1.13 billion in September 2021 due to high energy prices and an uptick in services imports, despite some moderation in non-energy imports.

Monetary policy: SBP raises key interest rate by 150 basis points, takes it to 8.75%

There was also a moderate month-on-month decline in exports and remittances. Current account deficit is likely to stay on the higher side in coming days as Pakistan’s imports continue to increase and commodity prices move upward in the world market.

With the current trend, the SBP is expecting that the current account deficit for FY22 is likely to modestly exceed the previous forecast of 2-3 percent of GDP.

With over 100 percent increase, goods trade deficit surged to $13.803 billion mark in July-Oct of FY22 compared to $6.79 billion in corresponding period of last fiscal year.

According to the SBP, services sector posted a $1.042 million deficit with $2.1 billion exports and $3.1 billion imports during July-Oct of FY22. During the period under review, primary income payments stood at $1.964 billion as against receipts of $245 million.

The cumulative deficit of trade, services and income rose to $16.294 billion during the first four months of this fiscal year as against $9.437 billion for the same period last year.

Copyright Business Recorder, 2021