The current account deficit showed a rare and near-ideal situation in the first month of the current financial year (2019-20) standing at $579 million in July, which is 72.8% lower than the deficit of the last financial year.
According to the State Bank of Pakistan (SBP), the current account deficit of the same month of the previous financial year stood at a whopping $2.130 billion, whereas in the current financial year it is at $579 million.
The start of this financial year has been tremendous, as some of the economic indicators exhibited a solid improvement in performance, particularly the trade deficit and remittances, which had a positive impact on the position of the country’s current account.
The accumulated trade deficit of goods and services dipped by a massive 72% in July, showing savings in billions of Dollars. The trade deficit nearly halved, to $2.32 billion in this financial year from $4 billion last year.
Besides, the remittances from overseas Pakistanis were recorded at over $2 billion with 2.8% year-on-year growth in July.
But Pakistan also received nearly $1 billion from the International Monetary Fund (IMF) for stabilizing the current account.
The improvement in the current account and inflows from friendly countries also reduced the pressure on foreign exchange reserves and exchange rates of the currency.
The government, through strict regulatory measures, reduced the current account deficit by over $6 billion in the previous financial year but it failed to meet its target of a $6 billion deficit, which was highly ambitious.
The government has the same target for the current financial year in terms of the current account deficit. The deficit is controlled at the current level through sustainable policies of reducing import bills and improving receipts through export earning and remittance inflows.