On Saturday, the State Bank of Pakistan released data that showed that the country’s current account deficit had clocked out at $1.03 billion for the month of March. Compared to the previous month of February, which recorded the CAD at $519 million, it’s an increase of almost 100 percent on a monthly basis. The figures also revealed that the current account deficit for March 2021 stood at $369 million.
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Moreover, according to the data released by the central bank, Pakistan has registered approximately $4 billion in its current account deficit in the three months of 2022, averaging approximately $1.3 billion per month. A major contributing factor to the current account deficit is Pakistan’s high reliance on imported goods and commodities. In the three months (Jan-March) of 2022, Pakistan imported goods worth $17,701 million, whereas its exports clocked in at $8,457 million for these three months. In March alone, the trade imbalance was $3,172 million. On the contrary, Pakistan has a considerably lower imbalance in the trade of services which only recorded a deficit of $264 million for the month of March and $1,040 million since 2021 ended.
Despite high global commodity prices, the turnaround in the current account continues, with a deficit of $1bn in Mar, $500mn lower than the average during FY22. Moreover, the non-oil balance remained in surplus for the 2nd consecutive month. https://t.co/Od8ikVvpBF pic.twitter.com/bQCNHQjOSz
— SBP (@StateBank_Pak) April 23, 2022
According to the provisional data, currently, Pakistan’s balance on trade in goods in the fiscal year 2022 stands at $30,097 million, whereas in the FY 2021, it stood at a relatively milder level of $19,349 million. As the current account deficit soars, Pakistan struggles to make any headway in terms of an economic recovery.
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Adding insult to injury, IMF also put forth a series of preconditions that Pakistan has to meet before the IMF releases the pending installment of loans. It has demanded steep fiscal adjustments, discontinuation of the amnesty scheme, increase in fuel prices, increase in power tariffs, and restoration of taxes before the country could expect to unlock the $3 billion. Pakistan’s federal reserves have also dropped down from $22 billion to $17 billion in just 2-3 months. As the deficit widens and the federal reserve wizens, the pressure on the currency increases, as a result of which the currency has fallen to rupees, approximately Rs. 186 against a dollar.Â
It is pertinent to mention that in a tweet, the central bank maintained that the “non-oil balance remained in surplus for the 2nd consecutive month.”