The current account deficit has contracted significantly by over 70 percent in the first ten months of the current financial year.
According to the State Bank of Pakistan (SBP), the current account deficit decreased to $3.343 billion during the period of July to April FY20 as compared to $11.449 billion recorded in the similar period of last financial year, showing a massive difference of $8.1 billion.
The current account deficit in the outgoing month of April shot up to $572 million after it saw a massive contraction of $7 million in April. Exports dropped massively during the lockdown in various countries including Pakistan which surged the deficit in the outgoing month.
Imports of the country continued to lower down in the current financial year, besides, remittances’ dropped slightly maintaining its major contribution in the position of the current account.
The trade deficit of the goods and services has dropped by 30 percent or $8 billion in the ten months of the financial year 2019-20. It decreased to $19.05 billion this year as compared to $27.2 billion recorded in the period of July to April.
On the other hand, remittance inflows during the said period recorded an addition of $979 million to stand at $16.9 billion.
It is believed that the prevailing economic slowdown will negatively impact the export receipts and inflows of remittances from the coming months which may also be unfavorable for the current account that attainted a significant improvement in the last three quarters.
The current account is one of the economic factors which remains stable during the economic crisis ensued by the Covid-19 pandemic, which also portrayed the massive drop in the import bill of the country. Besides, numbers of FDI and inflations maintained an improved situation in the economy.
The deficit is likely to settle between $4 billion to $4.5 billion by the end of the current financial year.