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