The current account deficit has narrowed down by 29 percent by the end of the third quarter of the financial year 2018-19 mainly due to the government’s policies to contain the trade deficit.
According to the data updated by State Bank of Pakistan (SBP), the current account saw a difference of $4 billion in the current financial year. It decreased to $9.5 billion in the period of July-March this year as against $13.5 billion last year.
The current account deficit in March grew by 66 percent compared with February. It increased to $822 million in March from $278 million in the preceding month of February.
Overall, the improvement in the current account is evident as it stood 22 percent less in the eight months and now it has decreased further to 29 percent in the nine months of the current financial year.
Compared with GDP, the current account deficit stands at 4.4 percent of the GDP as against 5.7 percent last year.
The dip of 14 percent in the trade deficit contributed to the improvement in the current account, which was possible due to the policies of Ministry of Finance to discourage the imports of luxury items in the country.
The government targets to reduce the trade deficit by $6 billion by June but its goal is highly ambitious albeit possible.
Furthermore, the remittances inflow grew by 8.7 percent in the nine months of FY19 which also played its major role in the narrowing down the current account deficit.
The contraction in the current account deficit is the manifestation of the efforts carried out by the outgoing Finance Minister Asad Umar. However, various reforms were introduced by him that will reap benefits in the months to come and are likely to arrest the current account deficit.