Karachi: The country’s current account posted over $7 billion deficit during the first five months of this fiscal year (FY22) due to increasing trade gap.
Despite strong growth in exports and remittances, the current account is deteriorating due to a massive rise in goods import bill. Overall, goods imports rose to $29.9 billion during July-Nov FY22, compared to $18.18 billion during the same period last year.
The State Bank of Pakistan (SBP) on Monday reported that the country recorded a $7.1 billion current account deficit during the July-Nov of FY22 compared to a $1.87 billion surplus in the same period of last fiscal year (FY21).
Month on Month basis, current account deficit also widened slightly to $1.91 billion in November 2021 up from $1.76 billion in October 2021, as imports outstripped strong exports and robust remittances. Imports were mainly lifted by high international commodity prices in addition to strong domestic economic recovery, the SBP mentioned.
SBP, recently, in its monetary policy statement has predicted that the current account deficit may be around 4 percent of GDP in FY22 mainly due to the higher imports and higher trade deficit. The recent estimate is higher than earlier projection.
According to SBP, around 70 percent increase in imports comes from the sharp rise in global commodity prices, while the rest is attributable to stronger domestic demand.
Near term monthly current account and trade deficit figures are likely to remain high, however, SBP is expected that current account is likely to gradually moderate in the second half of this fiscal year as global prices may normalize with improved supplies and tightening of monetary policy by the major central banks.
The detailed analysis showed that the cumulative deficit of goods, service and income surged to $13.706 billion in the first five month of FY22 compared to $ 13.457 billion in the same period of FY21.
Goods exports rose by 28 percent to $12.33 billion; however, the growth in goods import was higher than exports growth. Import bill surged by 64 percent to $30 billion during the first five months of this fiscal year.
During the period under review, with $2.72 billion exports and $4.044 billion imports, services trade deficit stood at $1.323 billion in July-Nov of this fiscal year. Similarly, during the period under review, the primary income sector deficit declined to $ 1.9 million, with $ 2.192 billion payments and $ 291million receipts.
The State Bank has already taken some measures to arrest the deterioration in the current account deficit. The Monetary Policy Committee of the SBP tightened the monetary policy to contain the aggregate demand and inflation.
The committee has increased the key policy rate by 250 basis points to 9.75 percent during the last one month to support sustainable growth.
Copyright Business Recorder, 2021