Pakistan’s current account deficit may witness a surge due to the high prices of oil and gas. Among other commodities, the shortage of metals, especially steel used in the local industry, can face supply constraints due to the prolonged Russia-Ukraine conflict.
Sources told ProPakistani that according to an initial estimate, Pakistan’s economy faces an additional burden of $400 million due to an increase in prices of oil and other commodities in the international market since the Russian attack on Ukraine.
The trade deficit widened by 82.2 percent during the first eight months (July-February) of the current fiscal year 2021-22 and reached $31.959 billion compared to $17.535 billion during the same period of 2020-21.
The government believes that the unexpectedly high prices of energy and other food commodities have pushed up the import bill, which widened the trade deficit.
According to an economic expert, the Pakistani market depends on Russia and Ukraine, along with other regional countries for wheat and metal to meet the local demand. Metal is used in steel, engineering, and building industries, which is mainly imported from Russia and Ukraine.
Pakistan also imports wheat from Russia and Ukraine. If the conflict is prolonged, then Pakistan might import wheat from other countries at higher prices, but the country might be facing a shortage of expensive metal since only Russian states export it. This might impact the local industry, which uses metal as raw material to export their products after its value addition.
As per initial estimates, in the case of a prolonged war, Pakistan will need to generate an additional $1.5 billion to bridge the current account deficit, the economist told this scribe.
He also said that although Pakistan doesn’t import gas from this region, the overall prices of gas can surge after oil prices, mainly due to this war. So, this increase will also impact Pakistan’s current account deficit, which has already crossed the estimates for the whole fiscal year.
The current account deficit has been increased to $11.7 billion from a surplus of $1.03 billion during the first seven months of the current fiscal year compared to the same period of the last fiscal year. Pakistan’s overseas’ remittances, which are the most important avenue for inflows after exports, might also be impacted due to prolonged war
