KARACHI: The country’s current account deficit fell sharply 66 percent during the first four months of this fiscal year (FY24) because of massive contraction in the goods imports bill.
Pakistan’s external account is gradually improving with a lower current account deficit during the initial months of this fiscal year. This will help to reduce the pressure on the country’s foreign exchange reserves, analysts said.
The State Bank of Pakistan (SBP) on Monday reported that the country’s current account posted $ 1.06 billion deficit during July-Oct of FY24 compared to $3.107 billion in the same period of the last fiscal year (FY23), depicting a decline of $ 2.048 billion.
Monthly current account deficit also down by 91 percent or $774 million in October this year compared to October last year. The country posted a current account deficit of $74 million for the month of Oct 2023 compared to a deficit of $ 849 in Oct 2022.
However, the current account deficit in October 2023 is 38 percent higher than September 2023, in which the deficit was $ 46 million.
Analysts said that the major reason behind improved current account is slow imports supported by the concrete measures taken by the federal government and SBP to curb the unnecessary imports.
The country’s total goods import bills fell sharply 20 percent during the initial four months of this fiscal year. Pakistan imported goods worth $16.79 billion in July-Oct of FY24 down from $ 21 billion in the same period of last fiscal year.
In addition, inflows of home remittances also posted 11 percent increase to reach $2.4 billion in October 2023.
As the country is facing a serious crisis of foreign exchange for the last one and half year, the government is making efforts to reduce imports to save the foreign exchange reserves of the country, which currently stood at $7.5 billion mark.
Pakistan has also signed a Stand by Program (SBA) with the IMF to build the depleting foreign exchange reserves and avoid default. First loan tranche was released in August this year, while Pakistan’s economic review for the release of the second loan tranche was completed last week.
At the end of the review the IMF team reached a staff-level agreement (SLA) with the Pakistani authorities on the first review of their stabilisation program supported by the IMF’s $3 billion (SDR 2.250 billion) SBA. The agreement is subject to approval of the IMF’s Executive Board.
Upon approval around $700 million (SDR 528 million) will become available bringing total disbursements under the program to almost $1.9 billion under SBA.
Copyright Business Recorder, 2023