ISLAMABAD: Pakistan has suffered a huge current account deficit of $1.237 billion in July 2022, the first month of the ongoing fiscal year 2022-23. In comparison with $904 million CAD in July 2021, the current account deficit last month was up by $333 million.
This current account deficit is the outcome of $3.753 billion trade deficit in July 2022, which is slightly higher than $3.712 billion trade deficit reported in July 2021 and a significant decline in remittances.
In July this year, the inflows of the remittances from expatriates also declined to $2.528 billion, from $2.828 billion in July last year.
On August 23, 2022, the government has raised regulatory and customs duty on the import of luxury items with the aim to discourage imports, keep the trade and current account deficits within affordable limits. The government had taken this decision a day after abolishing ban on the imports of luxury items to meet the requirements of the International Monetary Fund and the World Trade Organisation.
At present Pakistan is facing problem in enhancing its foreign exchange reserves as the IMF executive board is scheduled to meet on August 29 in Washington to accord approval to release of $1.17 billion tranche to Pakistan.
With the disbursement of the IMF loan, Pakistan government will be able to mop up more loans and investment from friendly countries to strengthen the foreign exchange reserves which are fluctuating below $8 billion (with the State Bank of Pakistan).
The government is also expecting stability in the value of rupee versus US dollar and other major currencies after the disbursement of IMF loan. On Wednesday, the US dollar-rupee exchange rate in the inter-bank was reported around 217 rupees and 222 rupees in the open market.
In July and early days of August the value of dollar surged to record high level of 245 rupees in the inter-bank and 250 in the open market. However, the positive developments relating to the IMF programme discouraged dollarization and the value of dollar fell to 212 in the inter-bank and 210 rupees in the open market a week ago.
These days, once again the value of dollar is going up amid reports of shortage of foreign currency in the market. The situation on this front is expected to get better once Pakistan receives the IMF tranche most probably in the first week of September.