As foreign remittances increase and imports decrease, current account deficit contracts 32%
The significant difference can be seen due to notable growth in inflow of remittances.
- Pakistan’s current account deficit contracts 32%, stands at $13.3 billion now.
- A decrease in imports and increase in foreign remittances can be credited for it.
- However, Pakistan still failed to achieve the deficit target.
Pakistan has successfully narrowed the current account deficit by a significant 13% in the fiscal year that concluded on June 30, 2019. The deficit currently stands at $13.59 billion. A drastic increase in worker remittances and a sharp decline in imports lead to the said results.
However, it must be noted that Pakistan still failed in achieving the deficit targets, in terms of both country’s gross domestic product (GDP) as well as in the total amount. The deficit stood at 4.8% of GDP ($283.9 billion) compared to a target of 4% set for the FY19.
According to the figures by the Planning Commission, the incumbent government has successfully restricted the amount to $13.3 billion.
Speaking to a local media source, Arif Habib Limited Head of Research Samiullah Tariq said that the figures still remain elevated. If Pakistan fails to control it in the ongoing fiscal year, it will ‘keep mounting’.
“The current account deficit has dropped but it still remains elevated. This is unsustainable. If it remains elevated in the current fiscal year as well, it will keep mounting the pressure on the rupee (against the dollar).”
Pakistan failed to meet the target due to low exports:
One persistent problem, that Pakistan faced this year as well, is low exports. While the target was set at an ambitious $28 billion, they stood at $24.21 billion, the main reason being depreciation of the rupee.
“The current account deficit has remained in the economy due to an increase in international petroleum oil prices in recent months. Non-oil current account deficit has reduced to almost zero”, Baqir said.
Previously, State Bank of Pakistan (SBP) Governor Reza Baqir said that the depreciation of the rupee in an increase in interest rates has helped in the contraction of both current account and fiscal deficits.
He added that the current account deficit has dropped to $1 billion a month (in FY19) compared to $2 billion a month last year. Raza said that though the exports have improved in volumes, they have improved in terms of ‘value’ and the textile exports alone have increased by 30%.
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