KARACHI: The current account deficit (CAD) reduced by 36 per cent to $809 million in July FY24 compared to $1.261 billion in the same month of the previous fiscal year, State Bank of Pakistan (SBP) reported on Friday.
However, July’s current account was in deficit for the first time after four months of surpluses. June saw a surplus of $504m.
The FY23 achieved a significant success in substantially reducing the CAD to $2.387bn (revised) from $17.481b in FY22.
The huge CAD in FY23 pushed the country towards a sovereign default. The situation worsened due to low dollar inflows, while donor agencies and friendly countries remained unmoved until the IMF approved a $3bn Standby Arrangement facility. Inflows from the IMF, Saudi Arabia, and the United Arab Emirates collectively boosted the SBP’s reserves by $8.7bn.
“Due to this deviation from focusing on traditional inflows, previous government failed to benefit from the sharp decline in the current account deficit,” said a senior banker. He said that had the losses been averted, the country could have witnessed a significant current account surplus.
Monthly deficit of $809m comes after four months of surplus
During the last eight months of FY23, the government tried to secure a $1bn stuck-up loan from the IMF, coinciding with falling remittances and export proceeds. The country faced a total loss of $8.2bn due to reduced remittances and export proceeds.
Goods exports in July fell by $101m to $2.116m compared to $2.217m in the same month of the FY23.
However, goods imports rose by 23.5 per cent, or $1.297b, to $4.220 billion in July, reflecting the import opening under the IMF arrangement.
According to the SBP, the balance of trade in goods and services amounted to a net deficit of $2.377bn, down from $3.332bn in the same month of the previous fiscal year.
Pakistan’s services imports reached $811m compared to $538m in services exports, resulting in a net decline of $273m in July. Services imports in July FY23 were $558m, slightly higher than the exports of $526m.
The sharp decline in CAD in FY23 was attributed to a steep 42.9pc reduction in the trade deficit to $27.59bn.
Published in Dawn, August 19th, 2023
