Pakistan-the current account deficit shrinks 42% in August

 The increase in exports and decline in imports is the main reason of this low deficit

According to the data released by State Bank of Pakistan, the current account deficit in August shrinks 42% month –on-month basis. The current account deficit was $1.2 billion in July 2022. But in August, it shrinks to $703 million ($0.7 billion).   The government policies to curtail the import ban have continued to bear fruits.  

"The current account deficit fell to $0.7 billion in August compared to $1.2 billion in July. The July-August FY23 current account deficit declines by $0.5 billion to $1.9 billion compared to same period of last year," the central bank said in a brief note released on its Twitter handle.

"This was mainly due to increase in exports by $0.5 billion and contraction in imports by $0.2 billion."

Analysts and financial pundits believe that the narrower deficit is the result of wide-ranging measures taken in recent months to moderate growth and contain imports, including tight monetary policy, fiscal consolidation and some temporary administrative measures.

On a year-on-year basis, the primary reason behind the decline in deficit was a 3% yearly decline in total imports. In addition to this, total exports and remittances increased by 17% and 2% year-on-year, respectively.

To keep the current account lower going forward, export data has to be watched carefully to ensure that momentum is not broken due to shortfall in imported inputs and domestic shortfall in cotton due to floods in the country.

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