Pakistan’s current account deficit (CAD) reduced massively to $74 million in February 2023 against $230 million in January owing to import restrictions and rise in remittances.
In a tweet, the State Bank of Pakistan (SBP) said: “CAD recorded $0.1 billion in Feb 2023 against a deficit of $0.5 billion in Feb 2022. Cumulatively CAD reduced to $3.9 billion in Jul-Feb FY23 compared to a deficit of $12.1 billion in Jul-Feb FY22.”
Pakistan’s current account deficit shrinks 90% YoY to $0.24bn in January: SBP
In a report, Arif Habib Limited (AHL) stated the deficit was the lowest monthly figure since February 2021.
It added that on a year-on-year basis, the primary reason behind the decline in deficit during first eight months of fiscal year 2022-23 was 24% decline in total imports. However, total exports and remittances also decreased by 19% and 9%, respectively.
Speaking to Business Recorder, AHL Head of Research Tahir Abbas said the deficit in February was far lower than January because of 5% increase in remittance while imports remained stagnant.
“However, there was a 1% drop in exports on monthly basis,” he said.
Alpha Beta Core CEO Khurram Schehzad told Business Recorder that CAD was falling “due to import restrictions and the current numbers are not realistic or market driven”.
SBP-held forex reserves increase $18mn, now stand at $4.32bn
He stressed banks were not opening letters of credit (LCs) due to which imports took a hit and resulted in lower deficit.
“If the restrictions continue, Pakistan can report a current account surplus as well but this step is abnormal and the CAD number is unsustainable,” he underlined.
Last year, Pakistan moved to restrict imports as the country’s foreign exchange reserves depleted to critical levels.
Islamabad is currently engaged in talks with the International Monetary Fund (IMF) for resumption of the stalled Extended Fund Facility (EFF). However, the fate of the deal still hangs in balance.
A resumption of the IMF programme would also unlock other avenues of funding for Pakistan.
Lately, loan inflows from Chinese institutions have helped support Pakistan’s foreign exchange reserves.