Current Account Deficit Records a Huge 75% Decline

Pakistan’s current account deficit has registered a sharp 75 percent decline in the first half of this fiscal year (FY20), mainly due to the trade deficit, which went down by 30.26% to $11.6 billion as compared to $16.7 billion last fiscal year.

According to the State Bank of Pakistan (SBP), the current account deficit narrowed down 75 percent to $2.153 billion in July-Dec of FY20. The deficit was $8.61 billion in the corresponding period of the previous fiscal year.

Comparing on a yearly basis for December, the deficit plunged 81% to $367 million for December 2019 compared to $1.88 billion in December 2018. The decrease was due to 20% YoY fall in total imports along with a 6% rise in exports.

According to analysts, improvement in goods trade deficit along with growth in exports has resulted in a massive reduction in the current account deficit this fiscal year. The major reason for the fall in the current account deficit was the sharp decline in the import bill.

”We need to use the current surplus as a cushion and shift focus on exports. Rising exports is the sole solution to our economic conundrum,” said Ossama Rizvi, an economic and geopolitical analyst.

The collective deficit of goods trade, services, and income stood at $14.732 billion in the first half of the current fiscal year versus $21 billion in the same period last fiscal year.

During the period under review, the deficit of the services sector decreased from $2.176 billion to $1.795 billion. The income sector’s deficit stood at $3.12 billion with $322 million inflows and $3.441 billion outflows. SBP believes that the current account balance is expected to improve due to more-than-expected contraction in imports.

  • Most importers just switched to smuggling so it doesn’t show up in official figures. The biggest winners are customs and border patrol people. They are extracting a lot of money in bribes.

  • The writer will be ashamed to publish the number of export growth he is giving as a reason behind this fall. The real reason is because of deferred oil payments. Once they become due next year we will see that this deficit will grow again. I think he supports PTI blindly.

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