KARACHI: The country’s current account deficit declined sharply 60 percent during the first half of this fiscal year (FY23) mainly due to lower import bill.
According to the State Bank of Pakistan (SBP), the current account recorded a deficit of $ 3.67 billion during July-Dec of FY23 compared to $9.09 billion in the same period of last fiscal year (FY22), depicting a decline of $5.42 billion.
Economists said that the federal government’s measures to curtail the rising import have put a positive impact on the country’s external account and the current account is continually presenting an improved picture. The lower current account deficit will also help to reduce the pressure on the country’s foreign exchange reserves.
The primary reason behind the decline in deficit was 18percent decline in total imports in the first six months of this fiscal year, supported by the government’s measures to constrict imports to save the precious foreign exchange. Overall, goods import bills decreased to $29.51 billion in the first half of this fiscal year down from $36.095 billion in corresponding period of last fiscal year.
However, during the period under review, the country’s total exports and remittances also witnessed negative growth and decreased by 6 percent to $14.21 billion and 11 percent to $14 billion, respectively.
Month on Month basis, the country’s current account deficit rose by 58 percent to $ 400 million for the month of December 2022 compared to a deficit of $252 million in November 2022.
However, current account deficit in December 2022 is some 78 percent less than December 2021, in which the country posted $1.857 billion deficit. On a YoY basis massive fall in deficit is because of 36 percent decline in total imports.
The country is facing a serious crisis of foreign exchange for the last one year; however the government has successfully avoid the debt default by taking some preventive measurers to reduce the import bill. Presently, the foreign exchange reserves held by the State Bank have shrink to $4.3 billion that are almost for 25-day imports.
The government is making efforts to build the sliding foreign exchange reserves and recently in Geneva Conference titled Climate Resistant Pakistan, international financial institutions and donors have pledged some $ 10.5 billion for reconstruction activities in the flood affected areas of Pakistan. Arrival of these inflows will help to build the country’s foreign exchange reserves and overcome from on going crisis.