Current account deficit shrinks on lower imports

Deficit fell by half to $316m in Sept compared to previous month

KARACHI:

Pakistan’s current account deficit (CAD) – the gap between foreign expenditure and income – continued to narrow down for the third consecutive month in September 2022 in the wake of a notable reduction in the import bill.

The drop in import bill came in the wake of government’s administrative measures to control the decline in foreign exchange reserves. The strategy, however, has badly impacted economic growth as several industrial units have closed down or have been crippled with low output. Export earnings have also started falling.

The current account deficit reduced by half to $316 million in September compared to $676 million in the previous month. The deficit drastically declined compared to $1.15 billion in the same month of last year, according to the central bank.

“In September, the current account deficit declined for the third month in a row. It fell to $0.3 billion, less than half the level in August. In Q1FY23 (Jul-Sept), the CAD has fallen to $2.2 billion from $3.5 billion in Q1FY22, mainly reflecting a decline in imports,” the State Bank of Pakistan (SBP) said on its official Twitter handle.

Imports declined to $4.82 billion in September compared to $5.85 billion in the previous month. They dropped significantly compared to $6.06 billion in the same month of last year.

Exports dropped to $2.50 billion in the month compared to $2.81 billion in August. Export earnings also remained low compared to $2.63 billion in the same month of last year.

Similarly, the inflow of workers’ remittances reduced to $2.44 billion in September compared to $2.72 billion in the previous month. Remittances also remained significantly low compared to $2.83 billion a year ago in September 2021.

Meanwhile, foreign direct investment (FDI) in different sectors of the economy shrank to $84 million in September, compared to $111 million in the previous month, as the economic slowdown amid devastating floods forced foreign investors to hold back their investment decisions. FDI stood at $250 million in September 2021.

Published in The Express Tribune, October 20^th, 2022.

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