Pakistan’s current account deficit plummets to $0.2bn

ISLAMABAD: Pakistan’s current account deficit (CAD) has witnessed a remarkable reduction during the initial ten months of the fiscal year 2024, plummeting to $0.2 billion against the fiscal year 2024 target of $6 billion.

The Finance Minister, Muhammad Aurangzeb, while unveiling the Economic Survey which delineates the economic and social performance of the FY2023-24, remarked, “At the onset of this fiscal year, the current account deficit [CAD] was earmarked at $6 billion, but it has now dwindled to $200 million within 10 months, and we anticipate further improvement in the upcoming months.”

The survey said that in July-March 2023-24, CAD witnessed a remarkable reduction plummeting to $0.5 billion from $4.1 billion in the corresponding period of the previous year. This substantial improvement, constituting an 87.5 percent decrease, can be credited to a confluence of efficacious governmental measures and propitious economic conditions. A noteworthy factor contributing to this reduction was the 25.2 percent decline in the merchandise trade deficit, propelled by a conspicuous decrease in import payments to $38.8 billion from $42.1 billion.

Despite confronting a challenging global economic milieu, Pakistan encountered a surge in secondary income surplus and a diminished trade deficit in goods. These encouraging developments have helped alleviate external pressures and assuage risks associated with external financing challenges. The dip in goods imports reflected subdued domestic demand, import control measures and dwindling global commodity prices. Furthermore, exports experienced an upswing owing to a substantial surge in food group exports, thereby fortifying the external sector’s performance.

Worker remittances have showcased an upward trajectory since October 2023, contributing to the enhanced current account. Moreover, the financial account received net inflows of $4.2 billion, primarily stemming from official and friendly country inflows, thereby further bolstering the stability of the exchange rate and sustaining foreign exchange reserves notwithstanding regular debt repayments.

During July-March FY 2024, exports of goods rose 9.3 percent to $23 billion, while imports declined 8 percent to $38.8 billion compared to the same period last year. The trade-in goods deficit is now $15.8 billion, down from US $21.1 billion. Services account deficit reached $1.655 billion. ICT exports surged 17.4 percent to $2.3 billion due to increased retention limits. Import of services rose 20.6 percent to $7.5 billion, driven by higher transport and travel service costs.

Remittances saw marginal growth of 1 percent to $21.0 billion in July-March FY2024, with significant increases in March attributed to Ramazan and Eidul Fitr. Key remittance sources include Saudi Arabia, the UAE, the UK, and the USA.