Current account deficit shrinks 73 percent

ISLAMABAD: Pakistan’s current account deficit during the first three quarters of the current fiscal year shrank by 73 percent to $2.768 billion compared to $10.284bn in the same period last fiscal year, data released by the State Bank of Pakistan (SBP) showed.

The SBP data showed the deficit in March was just $6 million compared to $283m in the corresponding month of last year. The current account deficit has fallen on account of falling imports due to coronavirus pandemic.

The data shows that exports of goods during the nine months under review remained relatively unchanged at $18.256 billion compared to $18.051 billion last year. The import decreased 19.25 percent to $3.32 billion in March compared to $4.11 billion in the same month of last year.

The import of services dropped 25% to $624 million compared to $829 million. The exports of services fell to $4.247bn during the nine months compared to $4.566bn last year whereas imports of services also declined to $6.688bn.

The import of goods decreased as aggregate demand fell massively ahead of an anticipated contraction in the economy during the current fiscal year ending June 30, 2020. The import of services declined due to the suspension of international air travel in response to the health crisis. Foreign remittances increased to $1.89 billion compared to $1.73 billion last year, showing an increase of nine percent.

The current account deficit plunged by 73 percent to $2.77 billion in the first nine months (Jul-Mar) of the current fiscal year compared to $10.28 billion in the same period of last year.

The trade deficit – gap between imports and exports – stood on an average $2 billion a month in the first eight months (Jul-Feb) of the current fiscal year 2020. The deficit has reduced to $1.5 billion mainly due to a slowdown in imports in March.

The developments suggest a favourable outlook on the current account position which could remain low in the next three months as the ongoing health and economic crisis could persist till June.

The International Monetary Fund (IMF) has forecast Pakistan’s current account deficit forecast will be around $4.5 billion, or 1.7 percent of the GDP, for the ongoing fiscal year. It was originally projected to be $6 billion or around 2.2 percent of the GDP.