Pakistan’s Current Account Deficit Reaches Its Highest Level in FY2022

Pakistan’s current account recorded the highest deficit of $1.66 billion during the current financial year 2021-22 in October 2021 according to the statistics released by the State Bank of Pakistan (SBP) on Friday.

The current account deficit surged to $1.66 billion in October 2021 from $1.13 billion in September 2021 due to high energy prices and an uptick in services imports, despite some moderation in nonenergy imports.

Overall, the current account deficit stood at $5.08 billion from July to October 2021 as against the current account surplus of $1.33 billion reported in the same period the last year.

Economic Analyst A.A.H Soomro told ProPakistani,

The current Account is heating up despite depreciation & various demand-reducing measures by SBP & the govt. These levels are not sustainable amid rising demand growth & stubborn food & energy prices. It’s time for curb the demand & protect the precious dollars.

The trade deficit also surged to an alarming $14.8 billion at the end of October, widening by 97% percent from $7.51 billion in the same period of last fiscal year.

Remittances, on the other hand, posted double-digit growth of 11.9% year-on-year recording inflows of $11.5 billion.

The current account deficit is heating up despite depreciation and various demand-reducing measures by SBP and the government.

The government and the banking regulator imposed strict measures to contain the imports of the goods and commodities which are considered as non-essential. The impact could be further visible gradually in the coming months.

The State Bank of Pakistan’s (SBP) Monetary Policy Committee (MPC) on Friday raised the policy rate by 150 basis points to 8.75 percent from 7.25 percent.

The State Bank of Pakistani in the latest MPC Statement stated that “In Pakistan too, high import prices have contributed to higher-than-expected CPI, SPI, and core inflation outturns. At the same time, there are also emerging signs of demand-side pressures on inflation, and inflation expectations of businesses have risen on account of further upside risks from domestic administered prices.”

“With respect to the balance of payments, the current account deficits in September and October have been larger than anticipated, reflecting both rising oil and commodity prices and buoyant domestic demand. The burden of adjusting to these external pressures has largely fallen on the rupee”, the bank added.