KARACHI: Pakistan has surprisingly reported a 19-month-low current account deficit (CAD) at $276 million for November 2022, thanks to a significant reduction in imports through administrative controls, but it came at the cost of economic growth.
The State Bank of Pakistan (SBP) reported that the current account deficit was 86% lower at $276 million in November compared to $1.92 billion in the same month of last year. It was 59% lower when compared with the deficit of $569 million recorded in October 2022.
“Cumulatively, in the first five months (July-November) of the current fiscal year 2023, it (current account deficit) contracted by more than half to $3.1 billion against $7.2 billion in Jul-Nov 2021, with imports falling by $4.8 billion (-16%) and exports broadly unchanged,” the central bank said on its official Twitter handle.
The significant drop in imports through administrative controls to manage the low foreign exchange reserves has, however, badly impacted economic activities.
Almost all industries are complaining about the persistent delay in import of raw material and said that their businesses are shutting down. This may trigger unemployment in the country, businessmen warned.
Pak-Kuwait Investment Company Head of Research Samiullah Tariq asked what were the other options under the current circumstances (low reserves), except for controlling imports.
The reserves have depleted to a four-year low of $6.7 billion, raising the spectre of default on international payments and foreign debt repayments.
PML-N’s former finance minister Miftah Ismail has been highly critical of his party’s current Finance Minister Ishaq Dar for his economic policies. Ismail said Dar’s policies were leading the country towards possible default.
Arif Habib Limited Head of Research Tahir Abbas said that the current account deficit declined to a 19-month low in November 2022.
“The primary reason was a 32% decline in imports in November compared to the same month of last year. However, exports and remittances decreased by 13% and 14% respectively.”
Tariq said that surprisingly the cumulative export earnings and workers’ remittances (at $4.35 billion) surpassed total imports ($4.26 billion) in November.