Karachi, July 18, 2023 – Pakistan has made significant progress in reducing its current account deficit, which stood at $2.56 billion for the fiscal year 2022-23. This represents a substantial 85% decrease compared to the previous fiscal year.
The State Bank of Pakistan (SBP) released the balance of payment (BoP) details on Tuesday, revealing the positive trend. In the fiscal year 2021-22, the country’s current account deficit was recorded at $17.48 billion.
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The remarkable reduction in the current account deficit can be attributed to a substantial decrease in the country’s import bill during the year 2022-23. According to the Pakistan Bureau of Statistics (PBS), imports plummeted to $55.33 billion in the reviewed year, down from $80.14 billion in the previous fiscal year.
However, Pakistan’s exports also experienced a decline of 13%, reaching $27.74 billion in the fiscal year 2022-23 compared to $31.78 billion in the preceding fiscal year.
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As a result, the trade deficit contracted significantly by 43% to $27.56 billion in the fiscal year 2022-23, compared to a deficit of $48.35 billion in the previous fiscal year.
Meanwhile, the inflow of workers’ remittances into Pakistan saw a notable decline of approximately 14%, totaling $24.02 billion in the fiscal year 2022-23. In the previous fiscal year, workers’ remittances amounted to $31.28 billion, highlighting the current decline as a significant challenge for Pakistan’s external sector and balance of payments.
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The substantial reduction in the current account deficit for the fiscal year 2022-23 indicates the government’s success in managing the external sector by imposing restrictions on dollar outflows throughout the year.
To prevent foreign exchange outflows, the government implemented conditions on the import of luxury and non-essential items. Additionally, the SBP exerted pressure on banks to strictly control the opening of letter of credit (LCs) for import payments.
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These restrictions have yielded favorable results in recent months, with the current account recording a surplus of $334 million in June 2023, compared to a surplus of $220 million in May 2023. In contrast, the country posted a current account deficit of $2.32 billion in June 2022.
