RECORDER REPORT

KARACHI: The country’s current account deficit plunged by 22 percent during the first eight months (July-Feb) of this fiscal year, mainly due to decline in goods imports.

According to the State Bank of Pakistan, the country’s current account posted a deficit of $8.844 billion in July-Feb FY19 compared to $11.421 billion in the same period of last fiscal year (FY18), depicting a decline of 22.56 percent or $2.577 billion.

Followed by lower import bill, month on-month (MoM) basis current account deficit in February 2019 declined by 59 percent to $356 million compared to $873 million in January 2019. During February 2019, goods imports dropped by 20 percent to $3.513 billion against $4.403 billion in January 2019.

The higher current deficit is a major challenge for the policymakers as the country’s foreign exchange reserves are weakening due to scheduled external debt servicing and higher current account deficit.

With the efforts of the federal government, Saudi Arabia and UAE pledged to place some $6 billion with Pakistan for one year to support the current account. So far, Pakistan has received some $3 billion from Saudi Arabia, while UAE has placed $2 billion with Pakistan to build the depleting foreign exchange reserves.

Another $1 billion from UAE is expected to arrive in next few weeks as Abu Dhabi Fund for Development (ADFD) has signed an agreement with the State Bank of Pakistan (SBP) for placement of $ 3 billion with Pakistan.

The SBP expects that the country is most likely to miss the current account deficit target of 4 percent of GDP for FY19. As per the SBP estimates, current account deficit will be 4.5 to 5.5 percent of GDP by the end of this fiscal year.