Current account deficit swells 10pc to $2.7bln in July-August

KARACHI: The current account deficit (CAD) swelled 10 percent to $2.721 billion during the first two months of the current fiscal year of 2018/19, the central bank’s data revealed on Wednesday.

The State Bank of Pakistan’s (SBP) data showed that current account deficit stood at $2.477 billion in the corresponding period of the last fiscal year.

In a surprising development, current account deficit came in at $600 million in August, considerably down 72 percent compared to the previous month.

SBP’s data showed that trade deficit in goods and services swelled to $6.625 billion during the period under review compared to $5.988 billion in the corresponding period a year earlier.

Pakistan Bureau of Statistics, however, said trade deficit was meager 1.25 percent in the July-August period as exports registered growth of 5.05 percent and imports grew 1.01 percent.

The government slapped regulatory duties on 1,800 items to ease pressure on import bills. The decision was an extension in the list decided by the last government to curtail trade deficit, which is the key driver to current account deficit.

The previous government slapped regulatory duties on more than 700 non-essential imports.

The previous restrictions on imports were estimated to give two billion dollars in benefits.

Remittances sent by overseas Pakistanis grew 13.45 percent to $3.966 billion during the first two months of the current fiscal year.

Pakistan is facing challenges to avert balance of payment crisis as its foreign reserves declined to a little over nine billion dollars that could cover only two months of import.

The current account deficit reached to a record $18.13 billion in the last fiscal year of 2017/18 as against the previous deficit of $12.62 billion in 2016/17.

Economists said the deficit is expected to surpass $21 billion in the current fiscal year. The external financing requirement is expected to be more than $31 billion, they added.

Foreign debt and liabilities soared around 14 percent to $95.097 billion in the fiscal year ended June 30.

While the government didn’t completely rule out approaching the International Monetary Fund – a usual lender of last resort – it has not taken the decision as yet.

The new economic team is, however, eager to attract foreign inflows from all possible means and that include friends of Pakistan.

Sources, privy to the matter, said Prime Minister Imran Khan’s recent visit to

Saudi Arab intends to take support from the nation to depleting foreign exchange reserves.