ISLAMABAD: The current account deficit of Pakistan in the first quarter (July-Sept 2021) period of this fiscal showed a further increase in CAD, to $3.4 billion. During the corresponding period of last fiscal year, Pakistan’s current account balance was surplus with $865 million.
During July-August period of this fiscal, the current account deficit stood at $2.2 billion compared to $865 million surplus in the same months a year ago. However, in Sept 2021, the current account deficit has slightly declined, $1.2 billion as against $1.47 billion in Aug-2021 because of different measures, which were put in place by the government to slowdown non-essential imports to avoid unwanted gap in the current account deficit.
In the month of Sept’21 alone, the country recorded a CAD of $1.11bn against the surplus of $27mn in Sept’20. While on a sequential basis, CAB witnessed an improvement in deficit, down by 24.4% MoM when compared to a deficit of $1.47bn in Aug’21 on the back of an increase in exports, Mettis Global, a Karachi-based fin-tech company, reported today quoting data of the State Bank of Pakistan (SBP).
Analysts said the deficit in Sept 2021 was below the expectation, from 1.5 billion to 1.2 billion which was a good sign and this trend, if prevailed further in FY22, it was squeeze further the current account deficit.
A strong rebound in economic activity and higher international commodity prices kept the current account deficit (CAD) at an elevated level, Central Bank said on its Twitter handle.
The trade deficit in goods narrowed by 6% MoM to $3.43bn in Sept’21 as exports of goods jumped by 12.5% MoM while imports saw a marginal increase of 1.3% MoM. However, the trade deficit in Goods has widened by 82% YoY in the said month
Meanwhile, the Trade balance in Services, while still negative, also improved by 65.2% MoM to $117mn courtesy of a 24.1% MoM reduction in imports though the exports increased marginally by 1.3% MoM.
On year-on-year, the trade deficit in services went up by 23% YoY. Worker remittances improved slightly by 0.45% MoM to $2.67bn from $2.66bn in Aug’21.
On a cumulative basis during July-Sept FY22, remittances by overseas Pakistani moved up by 12.5% YoY to $8.04bn from $7.14bn recorded in July-Sept FY21.
A good news is that exports also registered a surge of 35.2% during the period while remittances remained strong at $8 billion. The primary reason behind substantial current account deficit was the lofty import bill.
During the quarter, oil prices rose from $60 to $85 per barrel which inflated the import bill of Pakistan. Moreover, escalation in non energy imports coupled with uptrend in global commodity prices further widened the bill.
Besides, freight cost also jumped on the back of recovery in global demand as more and more countries are not lifting the Covid-19 restrictions.
Although exports registered an increase however a surge in international prices of energy products (coal and oil) offset the impact.
A report from Arif Habib Limited stated that higher demand for machinery led to a jump in overall import of goods during the quarter.
Textile exports increased by 27% to $4.4 billion during July-September 2021. In the same period, technology exports amounted to $635 million, contributing 40% to the overall services’ export and marking a 43% jump.”
The uptrend in current account deficit was being experienced on the back of supply shortages and spike in global commodity prices.
