A surging current account deficit amid depleting dollar inflows from multilateral and bilateral lenders, as well as shrinking foreign investment have brought the foreign exchange reserves and rupee under enormous pressure over the last several months.
By Staff Reporter
KARACHI: Current account deficit narrowed to $1.21 billion, in the first month of the fiscal year that began July 1 from $2.187 billion in the previous month, boosted by a sharp cut in imports, the central bank said in the balance of payments figures released on Wednesday.
“The current account deficit shrank to $1.2 billion in July from $2.2 billion in June, largely reflecting a sharp decline in energy imports and a continued moderation in other imports,” the State Bank of Pakistan said on its official Twitter handle.
“The narrower deficit is the result of wide-ranging measures taken in recent months to moderate growth and contains imports, including tight monetary policy, fiscal consolidation & some temporary administrative measures.”
In the last fiscal year, the current account deficit increased to a 4-year high of $17.4 billion.
July current account gap is in line with the analysts’ expectations and a positive sign for the battered economy as imports fell to $5.5 billion, down 35 percent from June’s record monthly high of $7.7 billion after a ban on imports of non-essential and luxury goods improved trade gap as well as current account balance.
The ban on the imports of non-essential items was lifted last week on the IMF pressure, though the government imposed high regulatory duties to curb imports.
Exports also plunged in July by 25 percent to $2.825 billion from $3.77 billion in June.
A surging current account deficit amid depleting dollar inflows from multilateral and bilateral lenders, as well as shrinking foreign investment have brought the foreign exchange reserves and rupee under enormous pressure over the last several months.
With the IMF expected to release its funds soon and thus unlocking additional financing from other multilateral and bilateral creditors, Pakistan’s external sector may likely perk up in the short term.
However, the deepening political turmoil is spawning doubts about the government’s ability to make tough decisions going forward and tackle the long-standing structural issues of the economy responsible for the recurring balance-of-payments crisis.
Central bank data showed that imports of goods stood at $5.39 billion in July 2022, compared to $7.03 billion in June 2022. Import of services stood at $790 million in July compared to $1.32 billion in June.
The current account was in a deficit of $851 million in July. Remittances fell 8 percent to $2.524 billion in July 2022, in comparison to $2.736 billion in the same period last year.
The import bill also witnessed a marginal increase of 0.4 percent year-on-year clocking in at $6.175 billion in July 2022, in comparison to $6.149 billion in the same period last year.
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