Pakistan’s Current Account Deficit to Remain Below $10 Billion in FY2023: Governor SBP

The Governor of the State Bank of Pakistan (SBP), Jameel Ahmed, has announced that the current account deficit (CAD) will stay below $10 billion for the rest of the current fiscal year.

According to the details, the estimated $10 billion shortfall (less than 2.3% of GDP) is about half of the World Bank’s 4.3% projection. This may minimize pressure on the exchange rate.

Also, Governor SBP said that the new restrictions on credit and debit cards will save $500 million a year. The government and reserve bank put the restrictions in place because they wanted to maintain the country’s foreign exchange reserves.

After a meeting of the Senate Standing Committee on Finance, he said it was likely that the CAD would remain significantly below $10 billion.

As per the Governor, dollar transfers by ATM card have been further restricted in order to reduce the unnecessary flow of dollars out of Pakistan.

He detailed that credit and debit cards are used to move about $1.4 billion every year, so putting the new rules into place will save $500 million.

During the first quarter, CAD was $2.2 billion, which is a decrease of 37%. The deficit could be 2.3% of GDP in the current fiscal year, which is superior to the SBP’s initial expectation of 3%.

Moreover, any reduction in the CAD will lower foreign loans by the same amount. The improvement is vital for the country’s economic growth and poverty reduction, especially since it is not getting much support from the IMF despite being in a program.

Meanwhile, the World Bank (WB) in its recent Pakistan Development Update (PDU) 2022 forecasted CAD at 4.3% of GDP, or approximately $17 billion. Note that Pakistan’s $17.4 billion deficit in 2021–22 was 4.6% of GDP, the biggest in four years.