Current Account Deficit at 4.7 percent of GDP – World Latest News Headlines

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Karachi: The current account deficit widened by $1.6 billion in October.

Data released by the State Bank of Pakistan (SBP) on Friday showed that the current account deficit was higher than in September, while its size in GDP terms increased from 4.1 per cent to 4.7 per cent.

The deficit has already exceeded the target, which was in the range of 2-3 per cent of GDP for the entire current fiscal.

The mounting deficit has had a huge negative impact on foreign exchange reserves and the exchange rate regime, resulting in a 13.4 per cent depreciation in the rupee during the current fiscal.

The gap has already exceeded the target level

In dollar terms, the current account deficit widened to $1.663 billion in October, while the deficit widened to $5.084 billion in the first four months (July-October) of the current fiscal.

The real reason for the current account deficit is the increasing size of imports.

According to SBP data, imports grew 66.3 per cent to $23.484 billion in July-October, from $14.118 billion in the same period of FY15.

The deficit on balance in goods and services during the period stood at $14.845 billion, compared to $7.546 billion in the corresponding months of the previous fiscal.

Goods imports exceeded $6bn in October, reflecting the failure of policy measures taken by the central bank and the government.

The first quarter results had already reflected the trend of trade and current account deficit as it widened to 4.1 per cent of GDP.

The widening current account deficit put pressure on the exchange rate as the local currency depreciated 13.4 per cent against the US dollar during FY12.

The government was successful in reducing the current account deficit from $20 billion in FY18 to $1.9 billion in FY21, but the increasing size of the recent deficit could be in the range of around $10 billion, provided the current situation remains the same. . Stay tuned for the fiscal year.

The current account deficit in September stood at $1.113 billion, compared to $1.473 billion in August. The fall in September was encouraging for the government but in October the deficit widened to $1.66 billion.

SBP’s forex reserves have fallen by more than $2.2 billion to $16.9 billion since October 1, reflecting poor reserves conditions.

The county is yet to receive the promised $3bn from Saudi Arabia, while the International Monetary Fund is yet to finalize talks for debt restoration.

The position is not in favor of exchange rate and balance of payments.

Published in Dawn, November 20, 2021