The country's current account deficit noticeably narrowed down by 17 percent during the first seven months of this fiscal year (FY19), mainly due to lower trade deficit and surge in home remittances. According to the State Bank of Pakistan (SBP), current account posted $8.4 billion deficit during July-Jan of current fiscal year as compared to $10.12 billion recorded during the same period of last fiscal year (FY18), depicting a decline of $1.7 billion.
During the period under review, current account deficit also improved from 5.4 percent of GDP to 4.9 percent, mainly due to the measures taken by the government to restrain the rising import bill and enhance exports. The SBP has already predicted that the overall current account deficit is expected to narrow down to 4.5-5.5 percent of GDP by the end of FY19 down from 6.1 percent in FY18. Economist said that imposition of regulatory duty on imports coupled with a healthy uptick in workers' remittances, led to narrowing of the CA deficit during this fiscal year. However, they said that the level of the deficit remained worrisome and needs more steps to restrict it further.
Pakistan is already facing a balance of payment crisis and current account deficit is being financed by available financial inflows from friendly countries as foreign investment could not keep up last year's momentum. In order to overcome the balance of payment crisis, the government imposed regulatory duty to curb imports of luxury and unnecessary goods. In addition, the government is seeking financial assistance from friendly countries - Saudi Arabia, UAE, Qatar and China - to finance the external account.
On Pakistan's request, Saudi Arabia has pledged a bailout package of $6 billion, including $3 billion of placement with the SBP for one year and an additional $3 billion oil facility on deferred payment. Pakistan has already received $3 billion from Saudi Arabia in three installments. In addition, UAE has also pledged $3 billion of which one billion dollar were released in January. The government is also negotiating with the International Monetary Fund (IMF) for $5 to $6 billion bailout programme for BoP. The programme is most likely to be finalized in next few months.
The State Bank data revealed that with $14.15 billion exports and $31.763 billion imports, the country's goods trade deficit is stable at $17.6 billion during July-Jan FY19. The combine deficit of goods, services and incomes sector declined slightly by 4 percent or $657 million to $22.824 billion in first seven months of this fiscal year against $23.781 billion in the corresponding period of last fiscal year.