Karachi, January 17, 2024 – In a remarkable turn of events, Pakistan has witnessed a substantial contraction of 77% in its Current Account Deficit (CAD) during the first half (July – December) of the current fiscal year, according to data released by the State Bank of Pakistan (SBP).
The CAD shrank to $831 million, a significant decline from the deficit of $3.63 billion recorded in the corresponding period of the last fiscal year.
Analysts are attributing this sharp decline in CAD to a substantial reduction in the country’s import bill. Data released by the Pakistan Bureau of Statistics (PBS) reveals that Pakistan’s import bill experienced a staggering 16.28% decline during the first half of the fiscal year 2023-24. The import bill dropped from $31.21 billion in the same period of the previous fiscal year to $26.13 billion in the current fiscal year.
Conversely, the country’s exports painted a more positive picture, showing a growth of 5.17%. During the first half of the current fiscal year, exports reached $14.98 billion, compared to $14.24 billion in the corresponding period of the last fiscal year. This positive export trajectory has contributed to a significant contraction of the trade deficit by 34.79%, reducing it from $16.96 billion in the corresponding period of the previous fiscal year to $11.15 billion in the first half of fiscal year 2023-24.
However, the overall balance was affected by a decline in the inflow of workers’ remittances into Pakistan. The country experienced a notable 7% decline in workers’ remittances during the first half (July – December) of fiscal year 2023-24. Remittances amounted to $13.43 billion during this period, down from $14.42 billion in the corresponding period of the previous fiscal year.
In a month-to-month breakdown, the CAD in December 2023 recorded a surplus of $397 million, marking a significant turnaround from a deficit of $365 million in the same month of the previous year. This surplus comes on the heels of a deficit of $15 million recorded in November 2023.
The data indicates a complex economic landscape for Pakistan, with a simultaneous decline in imports and remittances, coupled with a growth in exports. The reduction in the trade deficit is a positive signal, but the decline in remittances poses a challenge for the country’s external account. Policymakers and economists will closely monitor these trends to assess the overall health and resilience of Pakistan’s economy as it navigates the ever-changing global economic landscape.