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Current account deficit rises to $16bn

Updated June 21, 2018


KARACHI: The current account deficit rose to $16 billion in the first 11 months of this fiscal year, an increase of 43 per cent from the same period last year, according to data released by the State Bank on Wednesday.

According to SBP the deficit rose to $15.961bn during the July-May period of 2017-18 against $11.14bn in the corresponding period last year. As a percentage of GDP, the current account deficit rose to 5.5pc from 4pc of GDP in the same period of FY17.

The growing current account deficit is at the heart of the economy’s troubles on the external front, and its failure to stabilise despite three rounds of currency depreciation since December shows the difficulties involved are more resilient.

During the last couple of years the foreign exchange reserves of the State Bank drastically reduced to $10bn in June 2018 from $18bn in 2015-16.

The local currency was depreciated as a strategy to increase exports and discourage imports to get a reduced trade deficit which is the main cause of current account deficit. However, the strategy did not work as imports of goods and services increased by 14.4pc or $7.59bn during the 11 months of FY18.

The impact of 13pc increase in exports during this same period was neutralised by the higher import growth. The total imports of goods and services reached at $60.147bn during this period.

Compared to imports of goods and services of over $60bn, the exports touched the figure of $27.48bn during this period registering imbalance of $32.667bn.

The increasing size of current account deficit has impacted the exchange rate and the local currency lost over 16pc of its value against the US dollar during the past six months.

Published in Dawn, June 21st, 2018