Pakistan’s current account deficit shrank 90.2 per cent to $0.24 billion in January from $2.47bn in the same month last year, data shared by the State Bank of Pakistan (SBP) showed on Monday, as import restrictions continue to persist amid a balance of payments crisis that has brought the country on the verge of default.

Compared to December’s $0.29bn, the deficit decreased 16.55pc.

Pakistan has a chronic balance of payments problem which has exacerbated in the last year, with the country’s forex reserves declining to critical levels. As of Feb 10, the central bank had only $3.2bn in reserves, enough to cover barely three weeks of imports.

To stem dollar outflows, the government has imposed restrictions, allowing imports of only essential food items and medicines until a lifeline bailout is agreed with the International Monetary Fund (IMF), which is seen as essential for the country to stave off default.

Ismail Iqbal Securities’ Head of Research Fahad Rauf said the shrinking current account deficit was “not an achievement but a result of low reserves”.

The government’s strategy to restrict imports in order to safeguard reserves has turned out to be a double-edged sword, however, as several industries rely on imported inputs to continue operations.

As a result, multiple companies across sectors have either suspended operations or scaled down production levels, leading to layoffs.

The latest data shows that the country’s current account deficit during the first seven months of the current fiscal year stood at $3.8bn, which equates to a decline of 67.13pc compared to July-Jan FY22.

During January, $3.92bn worth of goods were imported, down 7.3pc from last month. On the other hand, exports also declined, clocking in at $2.21bn, down 4.29pc from the preceding month’s $2.31bn.

Meanwhile, workers’ remittances stood at $1.89bn, declining 9.89pc compared to $2.1bn in December.