Karachi January 24 2022: Through the first half of FY22, the current account deficit has reached USD 9 billion says State Bank of Pakistan Report on monetary policy.
Indeed, the non-oil current account deficit is less than one-fourth the record levels reached during the first half of FY18 and is expected to register a small surplus for the year as a whole.
The current account projection is subject to risks on both sides. On the one hand, the deficit could be larger if global commodity prices take longer to normalize. On the other, it could be smaller if the fiscal consolidation associated with the Finance (Supplementary) Act has a faster and more pronounced impact on demand.
Based on PBS data, imports rose to USD 40.6 billion, up around 66 percent (y/y), with energy imports and Covid vaccines accounting for more than half the rise. Encouragingly, imports excluding energy and vaccines have stabilized in the last two months.
Exports grew by nearly 25 percent (y/y) to reach USD 15.1 billion, buoyed by record-high shipments of textiles as well as strong rice exports. Meanwhile, remittances rose by 11.3 percent (y/y) to an all-time high of USD 15.8 billion during the first half of the fiscal year. Looking ahead, the current account deficit is expected to decline through the remainder of FY22, as import growth slows in response to a normalization of global commodity prices and the fuller impact of demand-moderating measures.