Current account remains in deficit despite jump in exports

By Omar Qureshi
Published in The Express Tribune on October 20, 2021

KARACHI: Pakistan’s current account deficit – country’s higher foreign expenditures compared to income – remained elevated at $3.4 billion during the first quarter (July-September) of fiscal year 2021-22 in wake of spike in imports coupled with higher international commodity prices.

According to the State Bank of Pakistan, the country recorded a current account surplus of $865 million in the corresponding quarter of previous year.

A strong rebound in economic activity and higher international commodity prices kept the current account deficit at a high level of $3.4 billion in Q1FY22, the State Bank of Pakistan stated in tweet.

Speaking to The Express Tribune, Arif Habib Limited Head of Research Tahir Abbas said that the huge current account deficit was witnessed on the back of soaring imports which increased 64% during the quarter on a year-on-year basis.

“The good news is that exports also registered a surge of 35.2% during the period while remittances remained strong at $8 billion,” the analyst cherished.

Echoing his views, Arif Habib Corporation Managing Director and CEO Ahsan Mehanti added that the primary reason behind substantial current account deficit was the lofty import bill.

“During the quarter, oil prices rose from $60 to $85 per barrel which inflated the import bill of Pakistan,” he said. “Moreover, escalation in non energy imports coupled with uptrend in global commodity prices further widened the bill.”

Besides, freight cost also jumped on the back of recovery in global demand as more and more countries are not lifting the Covid-19 restrictions.

Although exports registered an increase however a surge in international prices of energy products (coal and oil) offset the impact, he underlined.

A report from Arif Habib Limited stated that higher demand for machinery led to a jump in overall import of goods during the quarter.

“Textile exports increased by 27% to $4.4 billion during July-September 2021,” it underlined. “In the same period, technology exports amounted to $635 million, contributing 40% to the overall services’ export and marking a 43% jump.”

Pak-Kuwait Investment Company Head of Research Samiullah Tariq highlighted that the uptrend in current account deficit was being experienced on the back of supply shortages and spike in global commodity prices.

September data The central bank stated that the current account deficit narrowed to $1.11 billion in September 2021 against $1.47 billion in August 2021.

Arif Habib Limited’s report stated that the current account deficit dropped 24% in September 2021 on a month-on-month basis, driven by 10% surge in exports and 2% contraction in imports.

Topline Securites Director Research noted that export of goods touched an all-time high of $2.64 billion and posted a rise of 13%.

He projected the current account deficit to clock in between $10-11 billion (3-3.5% of GDP) in FY22.

Abbas was of the view that the ongoing wave of rupee depreciation against the US dollar would discourage imports over the next few months.

“The measures taken by the State Bank of Pakistan and the government to reduce the import bill are bearing fruits,” he said.

Your Comment:

Related Posts

27

Mar
CIMRAD, Print Media

Leveraging diaspora

By Aisha Khan Published in Dawn on March 26, 2023 IN its original formulation, diaspora referred to the dispersal of the Jewish people following the destruction of the First Temple. In the mid-19th century it was adopted by the Moravian Church to describe its congregation, and in the 20th century it was extended to a limited number […]

24

Mar
CIMRAD, Print Media

Not Quite Here: Politics Of The Diasporas

By Nadeem Farooq Paracha Published in The Friday Times on March 21, 2023 Some 13 years ago, when I was heading the media department of a British organisation, I got the chance to observe how most British expats in Pakistan voted in the 2010 UK parliamentary elections. Nine out of the 12 expats who agreed to reveal[…]