KARACHI: The country’s current account (C/A) deficit sharply declined by 78 percent during February 2022 compared to January 2022, mainly due to lower import bill.
The State Bank of Pakistan (SBP) on Saturday reported that the country posted a current account deficit of $545 million for the month of February 2022 as against $2.531 billion in January 2022, depicting a decline of $1.986 billion.
The deficit in February is the lowest in FY22 and only one-fifth of the level of January 2022. This is because of the higher exports and lower imports. Exports were close to an all-time high level of $2.8 billion in February 2022, rising 16 percent compared to January 2022. In addition, during February 2022 imports fell by 18 percent to $5.166 billion, the monthly lowest level of FY22.
However, the current account deficit in Feb 2022 is higher than Feb 2021, in which a $34 million deficit was recorded.
Cumulatively, during the first eight months of this fiscal year (FY22), the country’s deficit crossed the $12 billion mark. The country recorded a $12.1billion current account deficit in July-Feb of FY22 versus a $994 million surplus during the same period last fiscal year (FY21).
Jul-Jan C/A deficit data: a cause for worry
Analysts said that the rising current account deficit was a risk for the economic growth and a key challenge for the policy marker.
The lower current account deficit in February will reduce the pressure on external accounts, as well as, on the country’s foreign exchange reserves, which are continuing to decline because of external debt servicing and other payments, they added.
The pressures in the current account were also reflected in the market-based exchange rate, which continued to depreciate and reached Rs 180 during the last week.
SBP in its recent monetary policy statement also mentioned that continued adverse conditions of rising commodity prices could pose challenges to the outlook for the current account deficit and inflation expectations, which could necessitate changes in the policy rate.
According to SBP, the outlook for the overall current account deficit is dependent on the path of international oil prices. The non-oil current account deficit is expected to decline, as import growth continues to slow with moderating demand, while exports and remittances remain resilient.
As per SBP estimates, the current account deficit is likely to exceed last year’s level of 0.6 percent of GDP by a wide margin, mainly due to a higher-than-accounted for trade deficit, stemming from the rising trend in worldwide commodity prices.
It is being estimated that the recent adjustment in the policy rate would help to constrain import demand. However, SBP believed that the current account gap and the upcoming debt repayments are projected to be fully met by the available financial flows.
Copyright Business Recorder, 2022
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