The current account deficit doubled in March to one billion dollars
KARACHI: The country’s current account deficit nearly doubled in March to $1 billion from the previous month, bringing the total gap for the first nine months (July-March) of the current fiscal year to more than $13 billion.
The latest data released by the State Bank of Pakistan on Saturday may come as a shock to the new government, which is in negotiations with the International Monetary Fund to release $1 billion.
Since the beginning of the current fiscal year, the government has failed to control the widening trade deficit, leading to an increase in the current account deficit.
“Despite higher global commodity prices, the current account shift continues, with a deficit of $1 billion in March, $500 million below the average during FY22. Moreover, the non-oil balance remained in surplus for the second month. Straight.
The new government may find it difficult to stem the rise of the Canadian dollar amid a widening trade deficit
The current account balance – which measures the flow of goods, services and investments in and out of the country – was in a deficit of $13.169 billion during July and March, compared to $275 million a year earlier.
The State Bank reported that import growth reached 41.3 percent during the nine months, compared to 11.5 percent in the same period last year.
The cost of imports of goods and services totaled $62.137 billion during the July-March period, compared to exports of $28.855 billion. The rise in imports widens the trade deficit and undermines the exchange rate, as the demand for dollars has remained unusually high during the current fiscal year.
Quarterly data show that the current account deficit was $3.526 billion in July-September, $5.565 billion in October-December, and $4.078 billion in January-March, with an average of about $4.4 billion in quarter of the year. This means that the deficit could reach $17.5 billion by the end of the fiscal year.
The previous government tried to reduce the import bill by imposing higher duties on imports, especially on luxury goods.
But it failed to do so amid rising global oil prices. Pakistan paid more than $14 billion to import petroleum products during the July-March period, nearly double the oil import bill a year ago.
The State Bank reported that the trade balance of goods and services during the July-March period was in a deficit of $33.276 billion, compared to $21.292 billion in the period last year.
This double deficit will keep the new government anxious while requiring multiple measures to bring the situation under control.
The sharp drop in foreign exchange reserves led by the Social Investment Bank – currently at $10.8 billion – is allowing speculators to destabilize the exchange rate.
Besides, to stem accelerating inflation, the interest rate was recently raised by 250 basis points to 12.25 percent, and another hike is expected.
Posted in Dawn, April 24, 2022