According to data released by the State Bank of Pakistan (SBP) on Monday, Pakistan’s current account deficit decreased 90.19% to $0.24 billion in January from $2.47 billion in the corresponding month of last year, despite ongoing import restrictions and a balance of payments crisis that has the nation on the verge of default. The deficit shrank 16.55 percent from December’s $0.29 billion.
Pakistan’s long-standing balance of payments issue has gotten worse over the past year as the nation’s foreign exchange reserves have fallen to dangerously low levels. The central bank’s reserves were about $3.2 billion as of February 10—barely enough to fund three weeks’ worth of imports.
The government has put limits in place to stop the flow of dollars, allowing only imports of vital goods like food and medicine until a lifeline bailout deal with the International Monetary Fund (IMF) is reached, which is thought to be necessary for the country to avoid default.
Fahad Rauf, Head of Research at Ismail Iqbal Securities, stated that the decreasing current account deficit was “not an achievement but a result of inadequate reserves.”
Yet, because many businesses depend on imported inputs to run, the government’s plan to limit imports in order to protect reserves has proven to be a double-edged sword. As a result, numerous businesses from different sectors have either stopped operating or reduced production, which has resulted in layoffs.
According to the most recent data, the country’s current account deficit for the first seven months of the current fiscal year was $3.8 billion, which represents a decrease of 67.13 percent from July to January of FY22.
Imports in January totaled $3.92 billion, which was 7.3 percent less than in December. But, exports also decreased, falling by 4.29 percent from the previous month’s $2.31 billion to $2.21 billion. Meanwhile, workers’ remittances stood at $1.89bn, declining 9.89pc compared to $2.1bn in December.
