Pakistan’s Current Account Deficit Surges by Massive 517% in FY22

The current account recorded a significant deficit of $17.4 billion for the financial year 2021-22 (FY22) as against $2.82 billion reported during the financial year 2020-21 (FY21), stated the State Bank of Pakistan (SBP). This is primarily due to the high trade deficit, which was impacted by the import bill as the prices of petroleum products and food items skyrocketed. During the FY22, the trade deficit of goods increased to $39.5 billion as compared to $28.6 billion reported in FY21. The imports of goods increased to $72 billion whereas the exports surged to $32 billion. The trade deficit of services stood at $5.1 billion in FY22 versus $2.5 billion reported in FY21. The services imports also surged to $12 billion as against exports of $6.9 billion. Remittances, on the other hand, increased to $31.2 billion in FY22 as against $29.4 billion reported in FY21. The remittances recorded an all-time high inflow, but their impact is limited on the current account deficit. A surge in oil imports saw CAD rise to $2.3 billion in June despite higher exports and remittances. So far in July, oil imports are much lower and the deficit is expected to resume its moderating trajectory. In June, 3.3 million metric tons of oil was imported, 33 percent higher than in May. Coupled with higher global prices, this doubled the oil import bill from $1.4bn to $2.9bn. By contrast, non-oil imports declined. In June, the current account deficit stood at $2.275 billion as compared to $1.4 billion reported in the same month of the previous financial year. The depreciation of the Rupee against the Dollar has also caused a steep increase in the current account deficit.