KARACHI: The current account deficit (CAD) in February 2021 was down by 75 per cent year-over-year (YoY) to $50 million or 0.2% of the GDP compared with a deficit of $197 million in February 2020. Overall, the country’s current account remained in surplus at $881 million during eight months of the current fiscal year compared to a deficit of $2.741 billion in the same period last year.
According to the market analysts, the primary reason behind the decline in deficit was an 8 per cent YoY ($186 million) and 24 per cent YoY ($441 million) rise in total exports and remittances, respectively.
According to the data of the State Bank of Pakistan (SBP) released on Monday, the trade deficit in February this year increased by 50 per cent YoY to $2.349 billion against $1.568 billion for the same period a year ago, with the jump largely being driven by higher imports (up 27 per cent YoY).
On a month-on-month (MoM) basis, the CAD was down by 76 per cent, mainly due to a 45 per cent decline in the primary income deficit followed by a 3 per cent increase in total exports to $2.649 billion, the SBP data said.
During the last eight months of 2020-21, the country’s surplus clocked in at $881 million compared to a deficit of $2.741 billion during the same period last year.
The government has received a Portfolio Investment of $406 million in the last eight months, compared to a negative $2.2 billion.
The government has succeeded in bringing down the $20 billion current account deficit of 2018 to surplus this current fiscal year so far, but the trend indicates that by the end of 2020-21 the CAD could be in deficit, the analyst said.
According to the SBP figures, the government had so far failed to bridge the trade gap of country’s exports and is still clocking in between $2 billion to $2.12 billion, which means that it would be around $24 to $25 billion by the end of this fiscal year.
The data showed that the exports slightly dipped to $16.066 billion during the current eight months against $16.439 billion in the same period last year.
However, the imports further increased to $32.149 billion during July-Feb this year compared to $29.605 billion in the last fiscal year. The balance on trade in goods showed a deficit at $16.083 billion during the period under review compared to the deficit of $13.166 billion in the same period of last year.
According to the SBP, the balance on trade in goods and services recorded a deficit of $17.421 billion in the last eight months compared to the deficit of $15.466 billion in the last fiscal year.
The government has been providing several incentives to boost exports, but data shows the growth is slow and still less than the previous fiscal year. The textile sector has been claiming that the sector has received the bulk of orders from the USA, UK, and other countries, but the data shows that the exports are not good enough so far.
The market analysts said that the February deficit was significantly lower than the deficit in January ($197m). If the deficit remains within the range of $200 million to $250 million per month, the current account deficit could be zero or negligible by the end of the fiscal FY21, they added.
