Pakistan records current account deficit after 4 months of surplus

KARACHI: Pakistan recorded a current account deficit of $0.81 billion in July, 35.8 percent lower compared to last year. However, it was the first time in five months that the current account was in deficit. 

A current account is a measure of all the foreign exchange a country earns through exports and remittances, or conversely, loses through imports and loan repayments. Thus, a country runs a deficit when its outflows exceed its inflows. 

Data shared by the State Bank of Pakistan (SBP) showed that the country's total imports of goods stood at $2.1 billion in July, 4.55 percent lower compared to the same month last year. At the same time, imports stood at $4.2 billion, down 23.51 percent from July 2022. 

Separately, remittances amounted to $2 billion, falling sharply by 99.92 percent compared to the same month last year. 

Overall, the current account deficit was 35.8 percent lower than the figure of $1.26 billion in July FY23. Last month, the current account saw a surplus of $500 million.  

Pakistan, which has a perennial current account deficit problem, had been running a surplus for the last four months due to import restrictions that were imposed last year after the country's foreign exchange reserves fell to a critically low level. The International Monetary Fund (IMF) too noted in a staff report earlier this year that the current account deficit had "narrowed substantially" in the 11 months of FY23 because of a "sharp contraction of imports that reflected both administrative restrictions and limited foreign exchange". 

However, the import restrictions had led to a shortage of material across different industries and raised concerns about reduced exports. According to data published by the Pakistan Bureau of Statistics (PBS), large-scale manufacturing declined by 10.26 percent in the previous fiscal year. 

However, the government has recently lifted import restrictions, according to analysts, so the current account deficit may widen in the coming months.