Pakistan posted a current account deficit (CAD) of $773 million in the first month of 2021-22 against a surplus of $583m in July 2020.
According to data released by the State Bank of Pakistan (SBP), this deficit is in line with SBP’s expectations of a current account deficit of 2-3 per cent of GDP as economic activity continued to progress.
The statement said that the country’s current account had been in deficit since December 2020. In January it was $229m, $50m in February, $47m in March and $188m in April, but in May it widened to $650m and surged to $1.6bn in June, resultantly the country ended the FY21 with CAD of $1.8bn.
Rapid increase in imports was the real reason for current account deficit in July, the SBP data showed. The imports bill jumped to $5.396bn in the first month compared to $3.557bn in the same month of FY21. Exports also increased, but not very significant, to $2.257bn in July compared to $1.885bn in July 2020.
“Despite the recent increase in the current account deficit, the position of SBP’s foreign reserves continued to strengthen on a monthly basis,” it added. “This is in contrast to past trends and it is supported by country’s market-based exchange rate system.”
SBP Governor Dr Reza Baqir has recently said the CAD would be in the range of 2-3pc of GDP in FY22.
He said this would happen due to higher imports as the economy has started performing at larger scale.
On August 13, the foreign reserves held by the central bank were recorded at $17,625.9m, showing an increase of $3m when compared with $17,622m recorded on July 30.
Overall liquid foreign currency reserves held by the country, including net reserves held by commercial banks, stood at $24,668.1m. Net reserves held by banks were recorded at $7,042.2m.