KARACHI: The current account of the country continues to deteriorate, with a deficit of over $5 billion in the first four months of the current fiscal year (FY22), owing mostly to rising import bills.
According to economists, the current account deficit was remained high due to growing commodity prices on the international front and strong domestic activity. “The larger current account deficit is mostly due to rising goods import bills,” they stated.
The State Bank of Pakistan (SBP) revealed on Friday that the current account deficit in FY22 was $5.084 billion, compared to $1.313 billion in the previous fiscal year’s similar period (FY21). Sensing a danger to the external account, the SBP’s Monetary Policy Committee (MPC) hiked the main policy rate by 150 basis points to 8.75 percent on Friday.
Due to high energy costs and an increase in services imports, the current account deficit increased to $1.66 billion in October 2021 compared to $1.13 billion in September 2021, despite some decrease in non-energy imports.
There was also a moderate month-on-month decline in exports and remittances. Current account deficit is likely to stay higher side in coming days as Pakistan’s imports are continued to increase and commodity prices are moving upward side in the world market. With current trend, SBP is expecting that the current account deficit for FY22 is likely to modestly exceed the previous forecast of 2-3 percent of GDP.
With over 100 percent increase, goods trade deficit surged to $13.803 billion mark in July-Oct of FY22 compared to $6.79 billion in corresponding period of last fiscal year.
According to the SBP, service sector deficit posted a $1.042 million deficit with $2.1 billion exports and $3.1 billion imports during July-Oct of FY22. During the period under review, primary income payments stood at $1.964 billion as against receipts of $245 million. Cumulative deficit of trade, services and income rose to $16.294 billion during the first four months of this fiscal year as against $9.437 billion.—RIZWAN BHATTI