KARACHI: The country’s current account deficit fell sharply by 47 percent during the first four months of this fiscal year (FY23) supported by lower import bills. The State Bank of Pakistan (SBP) Monday reported that Pakistan posted a $2.821 billion current account deficit during July-Oct of FY23 against $5.305 billion in the same period of last fiscal year (FY22), depicting a decrease of $2.484 billion.
The federal government and the SBP have taken a number of measures to curtail the imports and the sharp decline in the goods import has largely contributed to the lower current account deficit. Trade deficit shrank $2.7 billion to $20.6 billion in the first four months of FY23.
Analysts said that the decline in the current account deficit will help save the depleting foreign exchange reserves of the country. Favorable movement in commodity prices in the international market and continuing import controls will help keep the deficit lower in coming months, they added.
Month-on-month basis, current account deficit rose by 56 percent to $567 million for October 2022 compared to $363 million in September 2022. However, despite lower remittances, the current account deficit in October 2022 is 68 percent lower than October 2021, in which it was $1.78 billion.
The country’s monthly average deficit during this fiscal year is $705 million, well below $1.4 billion during FY22 due to lower trade deficit.
The primary reason behind the decline in deficit during Oct 22 was a 23 percent decline in total imports. However, during the month, the total exports and worker’s remittances also decreased by 3 percent and 16 percent, respectively.
While lower imports were sufficient to nullify the slight decline in exports, keeping MoM trade deficit change minimal, the 8-month low remittances at $2.2bn took away some benefit of the ongoing administrative steps being taken to support the country’s foreign exchange reserve levels, analysts said.
“This pace of the current account seems unsustainable and expected to expand in coming months after normalization of imports,” they added.
In order to maintain the forex reserves of the country at a sufficient level, the government is making efforts to curtail the import bill. These measures have helped contain the CAD, however, there is need for increasing the inflows of home remittances and exports to maintain the current trend of CAD, they said.
Copyright Business Recorder, 2022
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