Current Account Records $773 Million Deficit in July 2021

The current account recorded a huge decline of $773 million in the first month of the financial year 2021-22 due to the ballooning trade deficit in the wake of the high import bill in July.

According to the data released by the State Bank of Pakistan (SBP), the current account deficit was reduced from the last month, which was $1.6 billion in June 2021. However, the current account had recorded a surplus of $583 million in July last year.

The SBP commented that this deficit is in line with its expectations of a current account deficit of 2-3% of the GDP as economic activity continued to progress.

The Managing Director at Khadim Ali Shah Bukhari Securities, A.A.H Soomro, said,

I believe the number is tapering off compared to last month’s. PkR’s depreciation is going to bump exports competitiveness marginally. Hopefully, the decline in oil prices will give nominal support this month. So far the number is comforting enough to keep monetary policy unchanged. It’s also good that PM and his economic team have started wording about CAD. Can not offer stability with a $10b yearly deficit.


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The trade deficit of goods surged to $3.13 billion in July 2021 as compared to $1.67 billion recorded last July, showing a $1.46 billion or 87 percent year-on-year (YoY) increase.

On the other hand, the trade deficit of the services reduced to $232 million in July 2021 from $315 million in the same month of the last financial year, dropping by over 523 percent YoY. Hence, the overall deficit stood at $3.37 billion, showing an increase of 70 percent in deficit values. The remittances maintained robust growth, with inflows slightly falling to $2.78 billion in July.

The spike in the current account deficit, followed by higher imports of the country, has pressured the government, resulting in its decision to take immediate measures to arrest the ballooning deficit of the current account.


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Forex Reserves

Despite the recent increase in the current account deficit, the SBP’s foreign reserves continued to strengthen on a monthly basis. This is in contrast to the previous trends and is supported by the country’s market-based exchange rate system.

The total liquid foreign reserves held by the country stood at $24.668 billion on 13 August 2021. The foreign reserves held by the SBP stood at $17.625 billion, and the net foreign reserves held by commercial banks stood at $7.042 billion. SBP’s reserves increased by $3 million during the week that ended on 13 August.