Pakistan’s current account deficit – the difference between the county’s higher foreign expenditures compared to income – recorded nominal at $50 million in February 2021, according to the central bank.
The deficit has narrowed down this time on the basis of growth in foreign income rather than cut in the expenditures. The income surged with the much-needed increase in export earnings, as inflows on workers’ remittances have already remained strong since June 2020.
The modest deficit has paved the way to boost economic activities in the country. However, the worsening third wave of the Covid-19 pandemic and spikes in prices of the commodities including food and energy remained some of the immediate challenges to economic growth.
The deficit is almost 75% lower in February compared to the same month of the last year. It fell by slightly over 76% compared to the previous month of January, State Bank of Pakistan (SBP) reported on Sunday.
February was the third successive month which recorded a deficit in the current account balance, which earlier stood in surplus for the first five successive months (Jul-Nov) of the current fiscal year.
Cumulatively in the first eight months (Jul-Feb) of FY21, the current account balance stood in surplus at $881 million compared to a deficit of $2.74 billion in the same period of the last year.
The export of goods grew almost 9% to $2.16 billion in February compared to $1.99 billion in the same month of last year. They improved slightly by over 3% in the month under review compared to the previous month of January 2021.
The growth in exports and strong workers’ remittances allow industrialists to make higher imports.
Earlier, the government had managed to narrow down the current account deficit through making imports expensive to fix the faltering economy. Liberalising imports is a must to accelerate economy growth as the domestic economy and its exports both remain largely dependent on imported raw materials so far.
The central bank said as the economy recovers, the trade deficit is widening somewhat on the back of imports of capital goods and industrial materials as well as food, together with rising international commodity prices.
“Nevertheless, the current account deficit in FY21 is still expected to remain below 1% of GDP given the out-turn to date, continued strong prospects for remittances – which have remained above $2 billion for the last nine months – and the on-going pickup in exports, especially high value-added textiles,” SBP said on last Friday (Mar 19).