KARACHI: The country’s current account deficit sharply declined by 54 percent during the first two months of this fiscal year (FY24) as goods import constricted.

According to State Bank of Pakistan (SBP), Pakistan posted a current account deficit of $935 million in July-Aug of FY24 as compared to a deficit of $2.035 billion during the same month of last fiscal year (FY23), depicting a massive decline of $ 1.1 billion.

The country’s current account is posting a deficit since July 2023 after posting surpluses in the preceding four months (March-June). However, the SBP believed that the current account deficit will remain in the target during this fiscal year. Current account deficit is largely in line with the earlier full-year current account projection of 0.5 to 1.5 percent of GDP for FY24, SBP said on Thursday.

Overall imports are expected to remain in check, supported by the favorable trend in non-oil commodity prices, moderate domestic demand and improved cotton production. In addition, favorable rice prices have a good outlook for exports.

According to the latest data released by the SBP, the trade deficit in goods reduced by 39 percent to $3.948 billion in July-Aug of FY24 compared to $6.524 billion in the same period of last fiscal year.

However, the services trade deficit increased massively 174 percent to $463 million in the first two months of this fiscal year as compared to a deficit of $ 169 million corresponding to the corresponding period of last fiscal year.

The SBP, in its monetary policy statement, believed that the recent structural reforms related to exchange companies will strengthen their governance structure and improve market functioning, resulting in healthy foreign inflows.

Month on Month basis, Pakistan posted a current account deficit of $160 million in August 2023 compared to $ 775 million in July 2023 and $774 million in August 2022.

Copyright Business Recorder, 2023