Pakistan’s current account deficit (CAD) decreased by 90 percent on a year-on-year (YoY) basis to clock in at $242 million in January 2023, data released by the State Bank of Pakistan (SBP) showed on Monday.
The country recorded a current deficit of $2.47 billion during the same period of the previous fiscal year (FY22).
At $0.24 billion, this monthly deficit is the lowest after 21 months, and lower than industry expectations, according to Topline Securities.
Current Account Deficit (CAD) recorded $ 0.2 billion in Jan 2023 against a deficit of $2.5 billion in Jan 2022. https://t.co/q3LNv3HgLshttps://t.co/Od8ikVvpBF pic.twitter.com/C3v9k4pZDb
— SBP (@StateBank_Pak) February 20, 2023
The current account deficit decreased by 67 percent YoY basis to clock in at $3.8 billion in July-January FY2022-23 (7MFY23), compared to the $11.56 billion recorded in the first seven months of FY22.
On a month-on-month (MoM) basis, the current account deficit decreased by $0.05 billion or 17 percent, compared to the $0.29 billion recorded in December 2022.
The CAD slump comes in reaction to the government’s aggressive stance against imports which has, contrary to the expectations of decision-makers, severely impacted manufacturing in the country.
Import/LCs issue
Import restrictions have been in place since June 2022 and since then, restrictions on letters of credit (LCs) have spread to all industries. Currently, SBP allows imports of only petroleum, wheat, cotton, pharmaceuticals, and defense-related items. Other industries, such as steel, plastics, and even packaging materials, have seen no new imports.
Many SMEs importers and traders have already gone out of business or might just do in the future if restrictions on trade aren’t eased. Pertinently, the decreased import bill has coincided with decreased exports and remittances as well.
