KARACHI: Pakistan’s current account deficit (CAD) shrank by 4.57 percent or $232 million in the first four months of the current fiscal year (July-October) as trade deficit narrowed and remittance inflows inched up during the period, State Bank of Pakistan (SBP) reported.
The current account deficit stood at $4.840 billion during July-October 2018-19, compared with $5.072 billion in the same period last year, SBP data showed. However, the current account deficit presented a dismal picture during October 2018 due to higher import bill.
The deficit widened to $1.218 billion in October from $909 million in the previous month, the SBP data showed.
Massive current account deficit inherited by the PTI government has forced it to approach several countries as well as international donors like the International Monetary Fund (IMF) to borrow about $12 billion for meeting the gap. In FY18, the total deficit amounted to $18 billion.
Pakistan Bureau of Statistics (PBS) reported last week that trade gap reduced by 1.97 percent to $11.786 billion in July-October amid stronger exports. Exports of goods rose by $3.52 percent to $7.285 billion as tax breaks on exports, and weaker rupee boosted foreign exchange earnings. Imports however inched up to $19.071 billion from $19.060 billion a year earlier.
Remittances to Pakistan increased 15 percent to $7.419 billion in July-October 2018/19. The current account deficit has started seeing reduction since the first quarter of this fiscal year.
The central bank expects the current account deficit to be in the range of 5.0-6.0 percent of GDP for FY19 against the government target of 4.0 percent.
The government’s announcement that the current account woes are over does not seem to hold, especially since no inflow of the promised $3.0 billion from Saudi Arabia has materialized yet while details regarding the IMF and Chinese packages are still to be finalized.