October 21, 2021: As per SBP, the current account deficit has reduced to USD 1.13 billion In September from USD 1.47 billion in August. Overall, the deficit in the first quarter was reported at USD 3.4billion.
It is important to note that the surge in import bills is due to a combination of a few one-off imports, rising global commodities, and energy prices.
Approximately, USD 400 million were spent on vaccines just in the month of September 2021 and overall one billion dollars during the last quarter. Therefore, adjustment with vaccines import, the current account deficit for the quarter has reduced to USD 2.4 billion.
Moreover, the sudden surge in import bill is the function of an abnormal surge in commodity prices. Energy prices including oil, LNG, or coal prices are following an upward trend. While, chemicals, steel, and food prices are also on rising. We expect supply bottlenecks of the above-stated items will streamline in the months to follow. This will further reduce pressure on import bills.
On the Export front, the trend is increasing on a month-on-month basis to USD2.64 billion in September or 12.5%. In the first quarter, exports recorded at USD 7 billion. It is expected that exports will be close to USD 31 billion and USD 6-7 billion services exports in June ending 2022. Similarly, remittances are right on track to mark USD 32 billion. Remittances & exports of goods & services combined will be in the range of USD 70 billion in FY22.
Lastly, due to a better crop outlook, the import of sugar, wheat & cotton will witness a massive slowdown during the second half of the fiscal year. This will further reduce the import and in turn, the current account deficit.
The risk to above includes a further hike in global commodity & energy prices.
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