KARACHI: The country’s main external parameters weakened in the first quarter of the current fiscal year due to the increase in imports and outflows of dollars, worsening the current account deficit and tipping the balance of payments into the red , according to data from the State Bank of Pakistan (SBP).
The current account deficit stood at $ 3.4 billion in the July-September quarter, compared to a surplus of $ 865 million in the same quarter a year ago due to a growing trade deficit of 11, $ 66 billion.
The balance of payments, which is the difference between the current account and the capital account, slipped into a deficit of $ 175 million in September.
In September, the current account showed a deficit of $ 1.113 billion compared to a surplus of $ 27 million in the corresponding month of the previous fiscal year.
SBP data showed September’s deficit narrowed slightly from August’s $ 1.413 billion deficit.
The surge comes amid booming demand, which is attracting imports, while this gap could widen further in the coming months, as high oil and commodity prices are also expected to keep the current account below. pressure and weaken the exchange rate of the rupee, which was one of the worst performers in Asia this year dented by soaring oil prices.
The SBP said the current account fell to $ 1.11 billion in September, from $ 1.47 billion in August. “A strong rebound in economic activity and rising international commodity prices kept the current account deficit high at $ 3.4 billion in the first quarter of fiscal 22,” the bank said. central in his Twitter account.
Analysts said they expected a much larger deficit for the current fiscal year.
“We are now forecasting a current account deficit of around $ 10-11 billion (3.0-3.5% of GDP) in FY22 compared to our previous estimate of $ 7-8 billion. dollars for the year, ”Topline Securities analyst Syed Atif Zafar said.
Over the past five years (FY17-21) and 10 years (FY12-FY21), the current account deficit has averaged $ 10.2 billion (3.5% of GDP) and $ 6.9 billion billion dollars (2.7% of GDP) per year, respectively.
The increase in the trade deficit mainly contributes to the worsening of the current account deficit. In the first quarter of this fiscal year, the goods trade deficit nearly doubled to $ 10.23 billion in the quarter under review from $ 5.283 billion in the same quarter of the previous year.
The services trade deficit also grew 100 percent to $ 10.949 billion in July-September this fiscal year, from $ 5.816 billion in the corresponding quarter last fiscal year.
In the face of increasing trade and current account deficits, the balance of payments has been given some respite thanks to the growth in remittances, which have continued to rise.
The country received $ 8 billion in remittances in the first quarter of fiscal year 2021-2022, posting growth of 12.5 percent from the same quarter of the previous fiscal year.
“We have also adjusted our estimate of remittances to $ 29 billion for FY22 from our previous projection of $ 28 billion,” Zafar added.
The rise in the current account is putting pressure on the exchange rate. The rupee has depreciated massively against the US dollar in recent weeks, crossing the limit of Rs 173.
Zafar predicts that the dollar-rupee parity will remain between 175 and 178 by June 2022.
“The local currency may find some support as imports eventually slow down due to the recent depreciation of the rupee under a market-oriented exchange rate regime, the resumption of the International Monetary Fund program and monetary tightening and expected budget, ”he added.