KARACHI: The country’s current account deficit accelerated 236 percent in May 2021 due to decline in exports and lower home remittance inflows. According to the State Bank of Pakistan (SBP), the country posted current account deficit amounting to $632 million for May 2021 compared to some $188 million deficit in April 2021, showing an increase of 236 percent or $444 million.
The deficit in May 2021 is the highest monthly deficit after Dec 2019, in which some $1.365 billion deficit occurred. In addition, the current account was surplus of $329 million during May 2020. According to the SBP, the higher current account deficit is mainly due to fall in the country’s exports in May 2021 due to partial lockdowns and long Eid holiday, and remittances moderated as usual post-Eid.
However, cumulatively, the country’s current account was remained surplus during the first eleven months of this fiscal year (FY21) supported by higher home remittances inflows. Current account was surplus of $153 million in July-May FY21 compared with deficit of $4.328 billion during same period of the last year. The State Bank is already expecting a lower current account deficit end of this fiscal year. As per SBP projection, current account deficit will be in the range of Zero (0) to 1.0 of the GDP in FY21 as against the target of 1.6-1.7 percent.
Overall, the external and fiscal sector indicators continued to improve during this fiscal year as both the current account and the primary balance posted surpluses. In addition, the improvement in the current account balance supported by higher home remittance and exports kept the external financing requirements lower compared to the previous years.
Analysts said that all time high remittances inflows and massive reductions in the services and primary income deficits were also the driving factors of improvement in the current account.
During the first 11 months of this fiscal year, goods trade deficit was $24.136 billion with $23.126 billion exports and $47.262 billion imports. Services sector deficit dropped to $1.507 billion in July-May FY21 compared to $3.049 billion in same period of last fiscal year. Primary income posted a $4.349 billion deficit in eleven months of this year as against $4.831 billion last year.
Copyright Business Recorder, 2021
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