KARACHI: The country’s current account deficit (CAD) shrank 76 per cent month-on-month to $50 million in February from $210m in January.
On a year-on-year basis, the CAD contracted 74.6pc from $197m in February 2020.
The State Bank’s latest data showed the CAD was still in surplus with $881 million during the first eight months of 2020-21. During the same period of last year the country posted a deficit of $2.741 billion.
The county has been posting CAD since December 2020 ($652m), but the size of the deficit has been shrinking each month. The country never came out from the clutches of trade deficit but it succeeded in bringing down the highest-ever $20bn CAD in FY18 to $2.97bn in FY20.
During 8MFY21 the exports declined slightly, but the imports increased significantly thus widening the trade deficit, but the 24pc increase in the remittances sent by overseas Pakistanis helped the current account to remain positive.
According to SBP data, the balance on trade in goods and services was in deficit with $17.421bn during July-Feb FY21 compared to $15.466bn in the same period of last year.
The State Bank of Pakistan in its monetary policy said that the CAD in FY21 is still expected to remain below 1pc of GDP given continued strong prospects for remittances. Since August 2020, the US dollar has been depreciating against the rupee and lost around 7.5 per cent which could reduce the import bill and ultimately cut the trade deficit.
It observed that the economy is recovering though the CAD is widening somewhat on the back of imports of capital goods and industrial materials as well as food, together with rising international commodity prices.
The last quarter (April-June) of the current fiscal year could be vital for the country as the third wave of the Covid-19 has started impacting the economic activities particularly the shipping of goods has emerged as one of the leading problems for the exporters. Both the exporters and importers said that due to coronavirus a number of important international ports are facing long queues of containers besides shipping services have increased their freight rates by 4 to 5 times.
Published in Dawn, March 23rd, 2021