Pakistan's current account deficit falls to 21-month low

Deficit falls to $242 million mainly due to a drop in imports

KARACHI:

Pakistan's current account deficit (CAD) surprisingly fell to a 21-month low of $242 million mainly due to a drop in imports to below $4 billion in January this year.

The deficit declined 10-fold this January compared to the $2.5 billion deficit in January last year. It is 17% lower than the $290 million deficit in December 2022.

Cumulatively, in the first seven months (July-January) of the current fiscal year 2023, the deficit has decreased by 67% to $3.8 billion compared to the $11.6 billion during the same period last year.

Arif Habib Limited (AHL) said that "the primary reason behind the decline in the CAD was a 38% year-on-year drop in total imports to $3.92 billion in January 2023".

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However, export earnings and inflow of workers' remittances decreased by 7% and 13% respectively, in January this year compared to the same month last year.

Topline Research said that the CAD dropped lower than market expectations.

The drop, however, was achieved at the cost of economic growth as massive cuts in the import of raw materials through administrative measures have caused the partial or complete closure of a large number of industries in the country.

AHL anticipates that economic growth will slow down to 1-1.25% in the current fiscal year 2023 compared to the 6% growth last year (FY22).

Further, the slump in the country’s foreign exchange reserves fell to around $3 billion after economic managers agreed to cut imports.