Current Account Deficit Shrinks by 71% in Jul-Feb FY 2019-20

The current account deficit of the country has shrunk 71% during the eight months of the financial year 2019-20, mainly due to lower imports of goods and improving inflows of remittances.

According to State Bank of Pakistan, the current account deficit has decreased to $2.84 billion in the period of July to February from $9.81 billion reported in the same period last year.

In percentage terms, the current account deficit narrowed to 1.5 percent of GDP during the July-Feb period compared to 5 percent in the same period last year mainly in the wake of a 26 percent reduction in the trade balance.

This happened as the trade deficit of goods decreased to $13.2 billion in the said period from $19.9 billion. The drop in imports helped maintain a lower trade deficit however exports receipts failed to sustain its growth in recent months despite easy loan facilities. The balance of trade in services also reduced to $2.36 billion from $2.63 billion recorded last year.

On the other hand, remittance inflows showed a steady growth to stand at $15.1 billion in eight months of FY20 as compared to $14.3 billion recorded in the corresponding period of FY19.

In the wake of the coronavirus outbreak, the economic activities are slowing down which will likely affect our export receipts and remittances from various countries. In the same vein, imports of various goods will also decrease from various countries that may offset the impact of the country’s foreign exchange earnings. The drop in crude oil prices is the other factor that will ease off its burden on the country’s import bills and current account deficit.

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