Current Account Deficit Shrinks to $0.7 Billion in August

The current account deficit in August reduced significantly to $0.703 billion in August as a result of the growth in exports and the substantial reduction in imports. According to data released by the State Bank of Pakistan (SBP), the Current Account Deficit (CAD) fell to $0.7 billion in August compared to $1.2 billion in July 2022 and $1.5 billion reported in August 2021. The month of August reflected the marked improvement in the balance of payment situation of the country. The impact of narrowing down CAD was recorded due to a series of measures taken by the government and the banking regulator particularly to curb the luxury imports which have taken a toll on the macroeconomic indicators including the outflow of foreign exchange reserves and widening of current account deficit. Cumulatively, Jul-Aug FY23 CAD declined by $0.5 billion to $1.9 billion compared to the same period last year mainly due to an increase in exports by $0.5 billion & contraction in imports by $0.2 billion. The current account deficit stood at $2.3 billion during the same period of the last financial year. The country’s balance of payment for goods reduced to $6 billion during the first two months as compared to $6.7 billion recorded in a similar period of the last financial year. On the other hand, the balance of payment for services was also reduced to $609 million from July to August as compared to $675 million reported in the same period of the last financial year. Moreover, the seasonal drop was also seen in remittances which reduced to $5.2 billion in FY23 from $5.4 billion recorded in the same period of the last financial year.