- Increases 56% on month-on-month basis
- Deficit for July-October period, however, is nearly 47% lower on year-on-year basis
Pakistan’s current account deficit (CAD) shrank by 46.8% during the first four months of this fiscal year (FY23) due to a lower import bill and marginal increase in exports. Deficit during October alone clocked in at $567 million, which is 56% higher on a month-on-month basis.
The State Bank of Pakistan (SBP) on Monday reported that cumulatively, the country recorded a current account deficit amounting to $2.821 billion in Jul-Oct FY23 compared to $5.305 billion in the same period of the previous fiscal year, a decline of $2.484 billion.
Decline in the current account deficit comes as imports reduced by $2.7 billion (or 11.6%) and exports increased by $0.2 billion (or 2.6%) compared to Jul-Oct 2021, the SBP said.
“Continuous decline in imports helped improve the CAD during first four months of FY23,” said the central bank.
On a month-on-month basis, the deficit increased by 56% or $204 million to $567 million in October 2022 compared to $363 million in September 2022.
Recently, the government has taken a number of measures to curtail the import bill to reduce the pressure on external account and maintain the foreign exchange reserves. These measures include limiting imports and restrictions on opening letters of credit.
The development comes as Pakistan looks to build its SBP-held foreign exchange reserves that have gone below $8 billion.
The country recently received $1.5 billion inflows from the Asian Development Bank (ADB).
Last week, the World Bank also announced that it will provide Pakistan $1.3 billion for emergency, agriculture, and housing relief in the wake of catastrophic floods.
However, talks with the International Monetary Fund (IMF) on 9th review of the Enhanced Fund Facility (EFF) have been delayed as the lender has linked arrival of its mission in Islamabad with the finalisation of macroeconomic framework with necessary adjustments.
On Saturday, Federal Minister for Finance and Revenue Ishaq Dar dismissed speculations pertaining to the country’s economy and said that the current account deficit would remain in check.
“It is being said that the current account deficit would reach its peak and become unmanageable by the end of this year. I would like to state that there are no such concerns, we are keeping a vigilant eye. It is being managed in a professional manner," said Dar in a video message.
The federal minister said the deficit in November is expected to be below $400 million.