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Current account deficit shrinks by 59pc in February
KARACHI: The current account deficit (CAD) plunges by 59 per cent in February compared to January in this fiscal FY19 which drastically reduced the deficit for the first 8 months of this fiscal.
The State Bank of Pakistan reported on Friday that CAD came out at $356 million, down from $873m in January; a decrease of $517m.
The government is faced with a massive CAD — which stood at $18.9 billion in FY18 — and has been the cause of dwindling reserves. However, since the beginning of the this year, there has been persistent decrease in CAD as it fell by 47pc month-on-month in January.
During July-February FY19, CAD fell to $8.844 billion, down 22.5pc, from $11.421bn in same period last year.
The primary driver of CAD is the large trade deficit. In February, exports were recorded at $1.862bn, plunging by 18pc, from $2.272bn in January. Imports also declined hence not to create any big impact on current account deficit. The imports during Feb were $3.513bn compared to $4.403bn in January.
The import and export figure during the eight-month period did not show much change. Foreign sales during 8MFY19 were posted at $15.975bn, from $15.987m in same period last fiscal year.
However, trade deficit for the period fell by $557m to $19.282bn, as against $19.839bn in corresponding period the year before. Meanwhile, the deficit in trade of services recorded a much sharper decrease as it declined to $2.304bn, from $3.630bn.
The government is making efforts to bring down CAD under control but the mixed trend on exports would make the job more difficult. Despite the massive rupee devaluation, export figures didn’t present a healthy picture. The government is also trying to cut down the import bill through a number of measures, such as oil on deferred payments from by Saudi Arabia worth $3bn.
The decline in import bill would help the country meet its ballooning debt servicing payments, which amounted to $5bn in the first two quarters of 2018-19.
Published in Dawn, March 16th, 2019
Comments (8) Closed
Export has reduced, import has reduced so CAD has reduced, it is not relief until your export increases.
Current account deficit has declined. But despite of massive devaluation exports are still not showing positive trend. It clearly shows that economic activity in the country is slow.Decline in imports results in reduction in revenues thus expanding the gap between fiscal deficit. There is another alarming thing that this year oil payments are deferred for one year and these payment will be made next year. Government has to improve industrial, agricultural production. Pakistani live abroad must be perduaded to send money through official channels. Attract tourists to visit Pakistan. Tax evaders should be brought into tax net.Close industries assets must be attached by banking courts and Banks must recover their money by selling these assets. Definitely new owners will run these industries. Nothing has been done to enhance the agricultural production. At least nothing has come in public. I'mran Khan can't do every thing. Others must also contribute their share of participation.
The reduction of the deficit is not because of increased exports but decreased imports. It just means that the trade volumes are falling. That’s a sign of a shrinking economy.
@Shaikh masood, Karachi is one of the key drivers of export, and karachi is under PPP and PPP is corrupt. Let PTI govern in Sind and then see the progress within months. Even to export goods, officials are paid around.
@Vikas , Exports will increase under PTI. Had a few distractions from vagrants like ‘war threats, foreign planes intruding our airspace, attacks on trees and crows. But we dealt with it and now back to business, before being rudely interrupted.
I think Asad Umar is doing lit better than absconded Ishaq Dar
Remittances are now life line of pak economy filling in the increased trade deficit inspite of 37 devaluation. Tax free budget flights to Middle East is the easy answer for growth as after seven months energy mismanagement has increased significantly .
Global economy is slowing down so it will be difficult increasing exports. If current account deficit was the problem in last two years , fiscal deficit and resultant inflation will be bigger problems in next two years.