ISLAMABAD - Pakistan’s current account deficit has widened to $3.4 billion during the first quarter (July-September) of current fiscal year 2021-22 amid massive increase in imports due to the higher international commodity prices.
The current account deficit (CAD), which is different between the country’s higher foreign expenditures compared to income – was recorded at $3.4 billion in July to September period of the 2021-22. The latest data of State Bank of Pakistan (SBP) showed that CAD remained in surplus of $865 million in the corresponding quarter of previous year. “A strong rebound in economic activity and higher international commodity prices kept the CAD at an elevated level of $3.4bn in Q1 (July to September) of FY-22,” said SBP on twitter.
The soaring CAD is one of the major concerns for the incumbent government. The CAD is widening due to the massive increase in imports amid higher prices in international market. The international financial institutions and central banks had projected higher CAD for the current fiscal year.
The International Monetary Fund (IMF) has recently projected that current account deficit would swell to 3.1 percent of the GDP in ongoing financial year as compared to the 0.6 percent in the preceding year. The World Bank had also estimated that CAD is projected to widen to 2.5 percent of GDP in next financial year FY23 as imports expand with higher economic growth and oil prices. The State Bank of Pakistan is looking at a current account deficit this year that is 2-3% (around $6.5 billion to $9.5 billion) of the gross domestic product (GDP).
According to the SBP data, exports increased $7.24 billion during July-September from $5.35 billion during the corresponding period of last year. On the other hand, the imports have recorded at $17.47 billion during July to September period of the year 2020-21 as compared to $10.64 billion in the same period of the previous year. The inflow of foreign remittances recorded at $8 billion in the first quarter of the ongoing financial year.
The ministry of finance noted that exports of goods and services in August 2021 according to BOP data were not far behind the expected $ 3 billion mark. For next month, the ongoing strong recovery in Pakistan’s main export markets, the momentum in domestic economic dynamism and specific Government policies to stimulate exports are expected to get exports of goods and services above the $ 3 billion level and more in the subsequent months.
These expected developments would reduce the balance on trade in goods and services around $ 3 billion in September 2021, as well as in the coming months. If remittances were to stabilize approximately $ 2.5 billion and taking into account the other secondary and primary income flows, the current account would remain in deficit but in manageable range.