Pakistan’s current account posts an uptick in deficit by $773 million in the first month of the current fiscal year 2021-22.
According to the State Bank of Pakistan (SBP), the current account deficit (CAD) for the month of July 2021 was in deficit compared to the surplus of $583 million noted in July 2020.
However, month-on-month basis the current account deficit declined 52 percent in July 2021 as against June 2021, in which the current account deficit was $1.619 billion, the highest in the fiscal year 2021.
In January the CAD was $229m, $50m in February, $47m in March, and $188m in April, but in May it widened to $650m and surged to $1.62bn in June, and by the end of fiscal year 2021 Pakistan had reached the CAD of $1.83bn.
The country’s imports are increasing due to pick-up in domestic activity and higher global commodity prices and expensive vaccine imports to deal with the ongoing pandemic.
The first month of fiscal year 2022 recorded total imports, in goods and services, of $6.12 billion vs. $4.33 billion in the same month of fiscal year 2021, showing an increase of 41.3pc Year on Year (YoY).
State Bank of Pakistan took to Twitter to say, “This deficit is in line with SBP’s expectations of a current account deficit of 2-3 pct of GDP as economic activity continued to progress.”
Sector wise, the goods sector saw the exports in Jul’21 standing at $2.257 billion compared to $1.885 billion in Jul’20, while the imports for the sector stood at $5.396 billion in the first month of fiscal year 2022 compared to $3.557 billion in the same month of fiscal year 2021. This resulted in an increase in trade deficit by 87.7pc YoY to $3.139 billion in July fiscal year 2022 up from $1.672 billion in July fiscal year 2021.
The service sector has done better YoY in July 2021 compared to July 2020, decreasing the trade deficit by 26.4pc to $232 million in Jul’21 down from $313 in Jul’20. This was attributed both to an increase in exports and a decrease in imports in the services sector. Pakistan saw $483 million in exports and $715 million imports in the first month of the current fiscal year.
Comparing the fiscal year 2021 with fiscal year 2020, the external account performed well during the last fiscal year supported by a market-based flexible exchange rate system, record remittances inflows, and growth in exports. The overall current account posted a deficit of $1.8 billion during July-June fiscal year 2021 as against a $4.449 billion deficit in fiscal year 2020, recording a decline of 58pc or $2.59 billion.