Current account deficit shrinks 37% to $2.2bn in Q1 of FY23 IG News

Current account deficit narrowed by 37% to $2.2bn in Q1 of FY23. Pakistan’s current account deficit narrowed 37 per cent to $2.2 billion in the first quarter of the current fiscal as a result of lower imports and growth in exports, central bank data showed on Wednesday.

Goods exports grew 5% to $7.6 billion in July-September FY2023, while goods imports fell 8% to $16.1 billion.

“In September, the current account deficit (CAD) declined for the third consecutive month. It fell to $0.3 billion, less than half the level in August. In Q1FY23, the CAD declined to $2.2 billion from $3.5 billion in Q1FY22, mainly reflecting a decline in imports,” SBP said on its official Twitter handle.

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Analysts said the fall in the current account gap was due to administrative measures and lower demand due to lower energy imports. SBP also kept a tight control on imports.

Fahad Rauf, head of research at Ismail Iqbal Securities, said the current account deficit figure for the first quarter is slightly better than expected. “The fall in petroleum imports is the main reason for narrowing the deficit,” Rauf said.

SBP expects the current account deficit to be around 3% of GDP during the current fiscal.

The impact on the current account deficit is likely to be subdued, SBP said in its latest monetary policy statement released on October 10, with pressures from higher food and cotton imports and lower textile exports largely stemming from slower domestic demand and lower global commodity prices. is offset. ,

“Looking ahead, there is likely to be a higher need for certain agricultural imports such as cotton and some perishable food items as a result of the floods. Also, exports of rice and textiles are likely to be affected negatively,” the SBP said.

However, these adverse impacts can be largely offset by downward pressure on the import bill from lower domestic growth and fall in global commodity prices and shipping costs.

Furthermore, as experienced in Pakistan after previous natural disasters, the impact on the current account can be further reduced with international aid in the form of current transfers.

According to SBP, foreign exchange reserves should improve during the year, given the secure external financing and additional commitments in the wake of the floods.


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