KARACHI: Pakistan’s current account deficit narrowed by 37 percent to $2.2 billion in the first quarter of the current fiscal year on lower imports and increased exports, central bank data showed on Wednesday. .
Exports of goods rose 5 percent to $7.6 billion in the July-September fiscal year 2023, while imports of goods declined 8 percent to $16.1 billion.
In September, the current account deficit (CAD) narrowed for the third consecutive month. It fell to $0.3 billion, less than half in August. In Q1FY23, CAD declined to $2.2 billion from $3.5 billion in Q1FY22, mainly reflecting a decline in imports, the SBP said on its official Twitter handle.
In September, the current account deficit (CAD) declined for the 3rd month in a row. It fell to $0.3bn, less than half the level in August. In Q1FY23, the CAD has fallen to $2.2bn from $3.5bn in Q1FY22, mainly reflecting a decline in imports. https://t.co/q3LNv3pFmS pic.twitter.com/B0SgTMhWJF
— SBP (@StateBank_Pak) October 19, 2022
Analysts said the narrowing of the current account gap was due to a reduction in demand due to administrative measures and lower energy imports. State Bank also kept a close watch on imports.
Fahad Rauf, head of research at Ismail Iqbal Securities, said the current account deficit numbers for the first quarter were slightly better than expected. “The reduction in petroleum imports is the main reason for reducing the deficit,” Rauf added.
The State Bank expects the current account deficit to remain around 3 percent of GDP during the current fiscal year.
In its latest monetary policy statement released on October 10, the SBP said the impact on the current account deficit is likely to be muted due to pressure from higher imports of food and cotton and lower exports of textiles. .
“Looking ahead, floods are likely to result in higher demand for some agricultural imports such as cotton and some perishable food items. At the same time, exports of rice and textiles are likely to be adversely affected,” Stat. The bank said.
However, these negative effects could be largely offset by lower domestic growth and downward pressure on the import bill from falling global commodity prices and shipping costs.
Also, as experienced in Pakistan after previous natural disasters, the impact on the current account can be further mitigated by international assistance in the form of current transfers.
According to the SBP, foreign exchange reserves should improve during the year, given secured external financing and additional commitments in the wake of floods.
