July 19, 2021 (MLN): Pakistan’s current account balance posted a deficit of $1.85bn in FY21, compared to the deficit of $4.49bn in FY20, marking a decline of 58% YoY.
As a percent of GDP, the Current Account Deficit (CAD) in FY21 fell to only 0.6% of GDP. This is the lowest in 10 years. The decline was mainly on the back of all-time high exports and remittance inflows which increased FX by $5.2bn in FY21 to over $17bn, a 4½ year high.
Taking to his Twitter handle, Senior economist Muzammil Aslam said “Encouragingly, Pakistan posted lower than projected CAD (0.6% of GDP) by IMF on the back of highest ever exports & remittances, despite imports are still short of FY18 levels. Importantly, the deficit is financed without losing reserves & keeping CAD sustainable.”
In the month of June’21, the current account deficit rose to $1.64bn, compared to $650mn in the previous month, while it rose by 13.58x YoY from $121mn in the same month last year.
On a sequential basis, the increase in the deficit was attributable to a $1.36bn increase in imports of goods. Whereas, exports of goods and remittances increased by $368mn and $197mn, to $2.5bn and $2.7bn, respectively.
According to SBP, some of the rises in imports were seasonal, associated with the bunching of year-end payments. While higher oil imp and Covid vaccines also rose the country’s import bill. Encouragingly, imports of capital goods like machinery continued to rise, reflecting improvement in investment outlook, it added.
“Rising import trend is not concerning except for rising global commodity prices. SBP has facilitated Pak production base via imports of machinery ($356mn in June). While June imports are always higher due to payment of deferred long-term security equipment payments,” Muzammil Aslam said.
Cumulatively, during FY21, total exports stood at $31.56bn, up by 13% YoY, whereas total imports showed a growth of 18% YoY to $61.59bn, resulting in a trade deficit of $30bn, which soared by 23% YoY.
Workers' Remittances by overseas Pakistani during FY21 registered a growth of 27% YoY to $29.37bn, compared to $23.13 in the previous fiscal year.
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