Pakistan’s current account deficit has decreased for the first quarter of this financial year (2019-20), going down 63.8%. This is all thanks to the reduction in the trade gap between imports and exports.
According to the State Bank of Pakistan, the current account deficit has narrowed to $1.548 billion in July to September 2019 as compared to $4.287 billion recorded last financial year, showing a massive difference of $2.739 billion.
The current account deficit showed volatility during the quarter. It reduced by 72 percent in the first month, then widened to 54 percent in the next month, and now settled at 63 percent by the end of the first quarter of FY2020. The deficit stood at $678 million in July, $610 million in August, and $259 million in September.
The trade deficit of goods and services reduced by 34 percent during the period, from $9.45 billion to $6.202 billion. On the other hand, inflows of remittances dropped by 1.4 percent in the first quarter to stand at $5.47 billion.
In addition to the reduction in the trade deficit, the disbursement of program-related inflows by the International Monetary Fund (IMF) and activation of the Saudi oil facility helped build SBP’s foreign exchange reserves.
The improvement in exports along with inflows of remittances and consistent control over imports may further stabilize the situation of balance-of-payments in the coming months.
The government must continue its strict economic policies for the stability of the balance of payments in the remaining months of the current financial year, which will enable it to meet at least one of its targets for the current financial year.