Pakistan’s current account recorded a massive deficit of $3.4 billion in the first quarter of FY2021-2022 owing to the increasing trade deficit in tandem with the high imports bill during the period from July to September in 2020.
According to the State Bank of Pakistan (SBP), the current account deficit stood at $3.4 billion from July to September 2021, as opposed to the surplus-value of $865 million reflected in the previous financial year, which had turned out to be an exceptional year.
However, during September 2021, the current account deficit narrowed to $1.11 billion from $1.47 billion in August 2021.
The trade deficit of the country surged to an alarming level of $11.66 billion at the end of the first quarter of FY22, widening by 100.62 percent from $5.81 billion in the same period of last fiscal year.
The imports of the country leapfrogged during the period on various accounts which include Rupee’s depreciation against the US Dollar, increasing imports of automobiles, imports of petroleum products and commodities at a higher cost from the international market.
The SBP commented,
A strong rebound in economic activity and higher global commodity prices kept the CAD at an elevated level of $3.4 billion in Q1-FY22.
The current account deficit narrowed to $1.11 bn in Sep 21 from $1.47 bn in Aug 21. A strong rebound in economic activity and higher int'l commodity prices kept the CAD at an elevated level of $3.4 bn in Q1-FY22.https://t.co/Od8ikVvpBF pic.twitter.com/AYvOAnhfUh
— SBP (@StateBank_Pak) October 19, 2021
On the other hand, exports receipts and remittance inflows maintained a consistent growth during the quarter from July to September 2021, however, these two earning drivers provided little support to the current account. Inflows under exports and remittances of the country surged to a record over $7 billion during the period under review.
The Government and banking regulator imposed strict measures to contain the imports of the goods and commodities which are considered as non-essential goods and services, even though the impact could be further visible gradually in the coming months.