KARACHI: The current account deficit shrank by 68% to $3.8 billion in the first eight months of the current fiscal year (FY23), down from $12 billion in the same period last year.
The CAD fell to $74 million in February, down from $519 million the previous year, the lowest monthly deficit since February 2021. On a year-on-year (YoY) basis, the deficit shrank by 86%.
The CAD fell due to a drop in imports, with no higher exports or inflows recorded. Despite the fact that the balance of payments reflected a healthy sign of improvement in the country’s external front, the government is unable to meet even this decreasing CAD due to extremely low foreign exchange reserves.
“A 24 percent decrease in overall imports was the main factor contributing to the lowering in the deficit on a YoY basis. According to Tahir Abbas, head of research at Arif Habib Limited, overall exports and remittances also fell by 19 percent and 9 percent, respectively, over the previous year.
The February loss was considerably smaller than the $230 million in January. The reduction became a pattern for the CAD throughout FY23 and may result in a significantly lower deficit than in FY22. The CAD was 17.4 billion during the most recent fiscal year (FY22).
According to experts, the CAD in FY23 may reach close to $6 billion. The International Monetary Fund (IMF) has been requesting that the government secure the funds required to satisfy the CAD by the end of FY23, therefore this number presents a serious issue for the nation.
China gave Pakistan two payments totaling $700 million and $500 million to help increase the country’s foreign exchange reserves, which were $4.3 billion as of March 10 of this year.
According to experts, the friendly countries are hesitant to give loans owing to political unpredictability since they are concerned that Pakistan may fail and their money may become trapped.