According to data issued by the State Bank of Pakistan (SBP) on Wednesday, Pakistan’s current account deficit decreased dramatically from $1.9 billion in the same month of the previous year to $0.4 billion in December 2022. However, the current account deficit increased from $252 million in November 2022 on a month-to-month basis.
Comparing July through December of FY23 to the same period of FY22, the deficit totaled $3.67 billion as opposed to $9.09 billion.
The current account deficit is a crucial indicator for Pakistan since a growing imbalance puts pressure on the currency, which fell for the 21st consecutive day on Wednesday (today).
With the use of the administrative tools at their disposal, policymakers have been frantically trying to reduce the ballooning import cost. These actions have included restricting the amount of cash that can be taken out of Pakistan by passengers and delaying the issue of letters of credit.
The SBP, however, received scathing criticism on Wednesday as Karachi’s business sector called for an end to the LC dispute, which has caused industrial activity to drop by over one-fourth over the previous few months.
The developments come on the back of a massive fall in official foreign currency reserves that clocked in at $4.3 billion earlier this month, leaving the level at less than one month of import cover. Global benchmarks suggest an adequate level of official reserves needs to be at three months of import cover.
Pakistan projected its financing requirements for FY23 based on a current account gap of $10 billion. However, in six months of FY23, the deficit has remained under $4 billion.