KARACHI: Pakistan’s current account deficit (CAD) significantly decreased to $681 million for the fiscal year 2023-2024, marking a substantial 79% reduction from the $3.275 billion deficit recorded in the same period of the previous fiscal year, according to data released by the State Bank of Pakistan (SBP) on Friday.
The CAD now represents just 0.2% of GDP, the lowest level in the past 13 years, as reported by brokerage house Arif Habib Limited (AHL). This dramatic improvement was driven by a 6% reduction in the trade deficit and an 11% increase in remittances.
In FY2024, Pakistan’s total export of goods and services amounted to $38.9 billion, while imports reached $63.3 billion, based on SBP data. Worker remittances during the same period totaled $30.25 billion, reflecting an 11% increase compared to the previous year.
On a monthly basis, Pakistan posted a provisional current account deficit of $329 million in June 2024, up from a revised deficit of $248 million in May 2024. This increase was attributed to a higher Balance on the Primary deficit of $1.1 billion, according to brokerage house Topline Securities. The persistent primary deficit exceeding $1 billion for the second consecutive month is attributed to the SBP clearing a backlog of profit and dividend repatriations.
Factors contributing to the reduced CAD include lower economic growth and high inflation, which have curbed the deficit. Additionally, increased exports, high interest rates, and some import restrictions have helped achieve a narrower deficit.
In June 2024, exports of goods and services were $3.07 billion, while imports were $5.69 billion. Remittances for the same month amounted to $3.16 billion.
The current account balance is crucial for Pakistan, which relies heavily on imports to sustain its economy. A widening deficit exerts pressure on the exchange rate and depletes foreign exchange reserves. Last week, Pakistan secured a 37-month, $7 billion Extended Fund Facility (EFF) from the International Monetary Fund (IMF), following a recent $3 billion Stand-By Arrangement.
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