Current Account Deficit Shrunk by 72% from January to July 2020

The current account deficit of the country shrunk by 72% during the seven months of the financial year 2019-20, mainly on the back of lower imports of goods and improving inflows of remittances.

According to the State Bank of Pakistan, the current account deficit has decreased to $2.65 billion in the period of July to January from $9.47 billion reported in the same period of the last year.

This happened as the trade deficit of goods decreased to $11.6 billion in the said period from $18.3 billion of the comparable period. The drop in imports maintained lower trade deficit, however, the exports receipts failed to sustain their growth in the recent months despite easy loan facilities.

The balance of trade in services also reduced to $1.97 billion from $2.37 billion of the last year.

On the other hand, remittances inflow showed a steady growth to stand at $13.3 billion in seven months of FY20 as compared to $12.7 billion recorded in the corresponding period of FY19.

The imports of the country slowed down right from the beginning of the current financial year, however, the central bank restored 50% advance payment facility for the import of machinery, plants and raw material inare December and up to 100% in January.

The imports are likely to increase in the upcoming months whereas the exports may remain subdued. Remittances may continue their steady growth and reflect positively on the current account position in the next five months of FY20.

These macro-economic factors may contain the deficit of the current account in the remaining period of the financial year.

Besides the stability in the current account, the country’s recorded improvement in the fiscal deficit, forex reserves, and Rupee and Dollar exchange rate.


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