Despite several efforts by the new administration and the banking regulator, the current account deficit (CAD) remained out of control, posting a massive deficit of $1.4 billion in May as opposed to the $0.6 billion reported a month earlier in April.
According to the State Bank of Pakistan (SBP), exports and remittances decreased because of Eid holidays, which offset a decrease in overall imports compared to April. In addition, it added, the deficit was lower at $1 billion when in-kind imports are excluded because they are fully funded and do not jeopardise the sustainability of the CAD.
In the first eleven months of the current fiscal year 2021–22, the overall current account deficit increased to $15.1 billion, up from the $1.1 billion deficit reported in the same period of the previous fiscal year 2020–21, according to figures issued by the State Bank of Pakistan (SBP).
Economic analyst A. A. H. Soomro commented on the situation by saying: “It is not surprising that the country is experiencing a PKR problem because the current account deficit is in the danger zone.” The government’s reversal of energy subsidies and the decline in cotton prices are both projected to hold down textile exports.
“Similarly, 3 million tonnes of imported wheat would temporarily increase imports. The slowdown is already occurring, though, and it will become apparent in a few months. But the Pakistani Rupee would not fall much lower. The IMF agreement and bilateral financing should bring the rupee back to less than 200; the worst is already priced in, he continued.
In contrast to the $27 billion trade deficit of goods and services reported during the same time last year, the trade deficit of goods and services soared to a record level of $40 billion during the stated period.
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