KARACHI: The Current Account Deficit (CAD) stood at $367 million (1.6% of GDP) in December 2019 – at similar levels when compared to $364 million (1.6% of GDP) in November 2019 but vastly lower than $1.881 billion (8.1% of GDP) seen in December 2018 (down 80% YoY).
On MoM basis, exports stagnated, but imports increased by 4.8% (+$178 millionn), leading to an 11.4% jump in the trade deficit. However, this was entirely compensated by the significant increase in workers’ remittances (+15.2% MoM), providing a significant cushion to the monthly CAD numbers.
Moreover, another positive outcome this month was the 131% MoM increase in the Capital & Financial Account balance, aided by flows from multilateral agencies, including the second IMF tranche, which also helped in boosting central bank’s forex reserves to $11.34 billion in December 2019 from $9.11 billion in November 2019.
However, during the month, foreign inflows in local debt instruments ($303 millionn) were more than offset by repayments ($1.0 billion) on account of maturity of five-year international Sukuk.
On a YoY basis, the 80% decline in CAD was mainly on the back of massive drop in imports (down 20% YoY), which has largely been the trend throughout CY19. Support was also found from remittances, which rose by 20% when compared to last year.
CAD has declined by 75% YoY during 1HFY20 (1.5% of GDP) to US$2.153 billion, from $8.614 million (5.8% of GDP) in the same period last year. The $2.15 billion mark for 1HFY20 indicates that CAD for FY20 could potentially close with the $4.5 billion-$5 billion range, which is significantly lower than the IMF forecast of $6.6 billion after a $13.8 billion CAD seen in FY19 ($19.9 billion in FY18).