KARACHI: Pakistan’s current account deficit witnessed a significant reduction of 81 percent during the first eleven months (July – May) of the fiscal year 2022-23, compared to the same period in the previous fiscal year.
The State Bank of Pakistan (SBP) released data from the Balance of Payment (BoP), indicating a decrease in the deficit to $2.94 billion, as opposed to the $15.16 billion deficit recorded in the corresponding months of the last fiscal year.
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Import Bill Reduction Contributes to Deficit Narrowing:
A noteworthy factor contributing to the reduction of the current account deficit is the substantial decline in Pakistan’s import bill. Import figures showed a substantial 29 percent drop to $51.21 billion during the review period, contrasting with $72.28 billion in the same months of the previous fiscal year. The government’s efforts to curtail the import of unnecessary and luxury goods, along with restrictions on opening Letters of Credit (LC) for import payments, played a significant role in achieving this decline.
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Trade Deficit Narrows by Over 40%:
While the measures to reduce the import bill were successful, they also led to a decline in export receipts. Pakistan’s exports declined by 12 percent to $25.38 billion from July to May 2022-23, compared to $28.87 billion in the corresponding period of the last fiscal year. Nevertheless, this decline in exports contributed to a positive outcome, as it helped narrow the trade deficit by over 40 percent. The trade deficit during the review period amounted to $25.83 billion, in contrast to the previous year’s deficit of $43.41 billion.
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Worker Remittances Experience a Decline:
In addition to the impact on imports and exports, the inflow of worker remittances into Pakistan also experienced a decline. From July to May 2022-23, worker remittances slipped by approximately 13 percent to $24.83 billion, in comparison to the $28.49 billion recorded in the corresponding period of the last fiscal year.
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Conclusion:
Pakistan’s current account deficit has shown a remarkable improvement, narrowing by 81 percent during the first eleven months of the fiscal year 2022-23. The reduction in the deficit can primarily be attributed to a significant decrease in the import bill, achieved through government initiatives to curb the import of unnecessary goods and restrictions on LCs. Although this led to a decline in export receipts and worker remittances, it also contributed to a substantial reduction in the trade deficit. These developments highlight the country’s progress in managing its external economic factors and fostering a more balanced financial outlook.
