KARACHI: As per data released by State Bank of Pakistan (SBP), the Current account deficit (CAD) for the first five months of FY22 widened by $7 billion. The figure in the same period last year showed a surplus of $1.8 billion.
The CAD in November alone clocked in at $1.9 billion, higher than $1.76 billion registered in October and the highest since July 2018.
Remittance growth has been softening lately, decreasing by 7% in November compared to October 2020. However, they are 1% higher than November 2020. The growth of remittances has slowed its pace and is 10% higher for this fiscal year compared to last FY.
The balance on trade in goods worsened by 104% year on year for the fiscal year clocking in a deficit of $17,571 million compared to a deficit of $8,624 million last year for the same period. For November 2021, the balance on trade in goods clocked in at a deficit of $3,707, which is 2% higher than the previous month, and 103% higher than November 2020.
The worsening of the balance of trade can be attributed to the drastic rise in imports compared to last year. Imports increased by 64% for the fiscal year clocking in at $29,901 million. On a month on month basis, the growth has slowed down to 7% for November 2021, however, if compared to November 2020, it is 58% higher.
Exports on the other hand have registered a 14% increase month on month coming in at $2,716 million which is 21% higher than November 2020. For the fiscal year, exports have increased at a steady pace of 29%.
Balance on trade in services improved by 21% month on month, and worsened by more than 4x for the month of November compared to last year, and deteriorated by 66% percent for the fiscal year.
Technology exports have increased 38% for the fiscal year and have risen 13% month on month earning $221 million.
Net foreign direct investment is down by 39% month on month, and up 12% for the fiscal year.
Analyst reactions
“Overall I believe that with a slowdown in consumption in the economy, adjustment in the currency and the hike in interest rate, the deficit should come into an acceptable range by Feb- March 2022,” Samiullah Tariq, Head of Research at Pak Kuwait Investment Company.
The import numbers are lower than the numbers released by the Pakistan Bureau of Statistics (PBS) which may be due certain imports whose payments remain to be made, says Fahad Rauf, Head of Research at Ismail Iqbal Securities . This however means that the SBP data for next month could show a surge in imports..
“While major expansion of imports came from petroleum products and vaccines it is important to note that due to the lag between payments and imports, the December 21 CAD will likely be higher than anticipated earlier,” says Rauf.
With increasing inflation, the savings will continue to deplete and this will effect future investment in the economy. Everyone, except property investors or industry owners – fed on continuous govt subsidiaries / amnesty schemes, are feeling this adversely. It has become impossible to either live on a single salary or save anything for the next month. In the long term, if there no immediate improvement in the economy, this will make to very hard for the individuals crossing 50 to make ends meet by the time they retire.