The current account deficit (CAD) reduced by over 50 percent during the first five months of the current fiscal year, says the SBP (State Bank of Pakistan).
On the other hand, the import of petroleum products also shrank by $7.70 billion after an 8.11 percent decrease in the abovementioned period – a trend contributing to the reduction in current account deficit.
It is certainly a welcoming news for the cash-starved country, is grappling with a deprecating rupee, shrinking foreign reserves, high interest rate and an alarming inflation.
According to the SBP, the current account deficit stood $3.1 billion in the July-November period of 2022-23 (FY23) against an amount of $7.2 billion recorded for the same months in 2021-22 (FY22).
The reason for this trend, the central bank says, are lower import bill and a slight increase in exports, as the government has focusing on reducing unnecessary imports
It means that imports have reduced by $4.8 billion (16 percent) so far during the current fiscal year, which can be termed a government success.
Meanwhile, the current account deficit shrank to $0.28 billion in November when compared with October’s figures of $0.57 billion, the State Bank added.
Experts and analysts are happy after hearing the news. Yousuf Nazar is one of them who described it as a relief. It reduced the gross financing gap to about $27 to 28 billion, he said.
Stressing the need for cooperation between Pakistan and global financial institutions, he added, “We need to work with the IMF to bridge the financing gap minus the rollovers.”
Reduced imports bill
As far as the decline in import of petroleum products is concerned, reduced demand and surging prices have been the factors.
The data shared by Data compiled by the Pakistan Bureau of Statistics (PBS) shows the reduction in amount was 14.52 percent and 36.09 percent in quantity during July-November period. For example, the import of crude oil decreased by 18.48 percent in quantity but the value jumped by 10.55 percent.
Similarly, LNG imports fell year-on-year by 17.38 percent during the period under consideration. This would have translated into relatively lower power production through LNG — a replacement for furnace oil. But the liquefied petroleum gas (LPG) imports jumped 16.19 percent.
Similarly, the machinery imports posted a fall of 42.35 percent to $2.76 billion against $4.78 billion in the same period last year after a sharp drop in arrivals of telecom equipment including mobile phones, which declined by 66.08 percent year-on-year. The import of textile, office and power-generating machinery also shrank during the period.
However, food imports grew by 1.63 percent to $4.08 billion as palm oil buying jumped by 13 percent and soybean oil by 234 percent. Pakistan also imported 1.09 million tonnes of wheat and 612,019 tonnes of pulses in July-November 2022-23.