Jameel Ahmed, Governor of the State Bank of Pakistan (SBP), has announced that the current account deficit (CAD) will remain below $10 billion for the remainder of the fiscal year.
The estimated $10 billion shortfall (less than 2.3% of GDP) is roughly half of the World Bank’s 4.3% projection. This may reduce downward pressure on the exchange rate.
Additionally, Governor SBP stated that the new credit and debit card restrictions will save $500 million per year.
The restrictions were imposed by the government and the reserve bank in order to preserve the country’s foreign exchange reserves.
Following a meeting of the Senate Standing Committee on Finance, he stated that the CAD was likely to remain significantly below $10 billion.
According to the Governor, ATM card dollar transfers have been further restricted in order to reduce the unnecessary flow of dollars out of Pakistan.
He explained that credit and debit cards are used to move approximately $1.4 billion each year, so implementing the new rules will save $500 million.
CAD was $2.2 billion in the first quarter, a 37% decrease from the previous quarter. The current fiscal year’s deficit could be 2.3% of GDP, which is higher than the SBP’s initial estimate of 3%.
Furthermore, any decrease in the CAD reduces foreign loans by the same amount.
The improvement is critical for the country’s economic growth and poverty reduction, especially since, despite being in a program, it does not receive much support from the IMF.
Meanwhile, the World Bank (WB) forecasted CAD at 4.3% of GDP, or approximately $17 billion, in its recent Pakistan Development Update (PDU) 2022.
It is worth noting that Pakistan’s $17.4 billion deficit in 2021-22 represented 4.6% of GDP, the highest in four years.
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