The country's external account continues to perform well as the current account deficit plunged by 64 percent during the first quarter of this fiscal year (FY20), supported by massive contraction in goods import bill.
The State Bank of Pakistan (SBP) Friday reported that Pakistan's current account deficit declined to $ 1.548 billion in Jul-Sep of FY20 compared to $ 4.287 billion in the same period of last fiscal year (FY19), depicting a decline of $ 2.739 billion.
Month-on-month basis, the country's current account deficit declined by 57 percent to $ 259 million in September 2019 down from $ 610 million in August 2019. Economists said that for the last one year, the federal government was striving to curtail the soaring CA deficit to save the country's depleting foreign exchange reserves. As part of these efforts, a number of structural reforms were undertaken, including regulatory duty that was imposed on luxury items to reduce imports.
The government's policies seem successful as goods import bill witnessed a notable decline of over $ 3 billion in the first quarter of this fiscal year. The continued contraction in the goods import bill will also help reduce the pressure on external account as well as on foreign exchange reserves, they added.
According to the SBP, cumulative deficit of goods trade, services and income decreased by $ 3.25 billion to $ 6.202 billion in the first quarter of FY20 versus $ 9.458 billion in the same period of last fiscal year.
During the period under review, goods exports jumped 2.37 percent to $ 6.033 billion, whereas imports shrank by 23 percent to $ 11.032 billion. As a result, balance of trade in goods fell 40 percent to $ 5 billion in Jul-Sep of FY20 against a deficit $ 8.382 billion in Jul-Sep of FY19. However, on the other hand, deficits of service and income sector are still increasing. With $ 1.226 billion exports and $ 2.429 billion imports, services trade deficit slightly moved up by 12 percent to $ 1.203 billion at the end of first quarter of FY20.
Similarly, income sector deficit also climbed to $1.483 billion in the first quarter of this fiscal year compared to $1.121 billion in the corresponding period of last fiscal year. During the period under review, income sector outflows stood at $ 1.609 billion against the inflows of $ 126 million.
Copyright Business Recorder, 2019
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