KARACHI: Despite increased exports and remittances, Pakistan’s current account deficit—the difference between the nation’s high foreign expenses and low income—grew to $2.3 billion in June 2022.
Pakistan’s current account deficit
The State Bank of Pakistan reports that the country’s current account deficit increased to $2.3 billion in June 2022 from a deficit of $1.6 million in the corresponding month of the previous year.
The current account deficit for fiscal years 2021 and 2022 as a whole increased by a staggering 517 percent, coming in at $17.4 billion annually as opposed to the figure of $2.82 billion during FY21.
The central bank announced the increase in the current account deficit on its official Twitter account. “As foreshadowed by earlier Pakistan Bureau of Statistics (PBS) data, a surge in oil imports saw current account deficit rise to $2.3 billion in June despite higher exports and remittances,” it read.
The SBP also stated that oil imports have been significantly lower so far in July and that “deficit is expected to resume its moderating trajectory.”
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It stated that 3.3 million metric tonnes of oil were imported in June, a 33% increase from May.
“When combined with higher global prices, this more than doubled the oil import bill from $1.4 billion to $2.9 billion,” the SBP said, adding that non-oil imports had decreased.
According to the balance-of-payments summary, Pakistan recorded $3.12 billion in goods exports and another $646 million in services exports. However, the current account deficit was caused by a massive import bill in June, which totaled $7.04 billion in goods and another $1.37 billion in services.
‘The oil import bill has risen to an uncomfortably high level,’ says an economist.
It should be noted that the current account balance is an important indicator of Pakistan’s economy; a growing deficit leads to an outflow of US dollars, which has weighed on the currency, which is currently trading at a historic low of Rs236.02 per dollar.
“A rise in petroleum product imports has resulted in a current account deficit of $2.3 billion in June 2022,” Dr Khaqan Najeeb, an economist and former Ministry of Finance adviser, said.
In June, the cost of oil imports alone increased to a “rather uncomfortable level” of $2.9 billion, he said.
The economist held the opinion that the overall current account deficit for the most recent fiscal year 2021–2022 was higher than expected at $ 17.4 billion, which had an impact on the depreciation of the Pakistani rupee against the US dollar in a market-based exchange system with minimal SBP intervention.
Dr. Najeeb stated, “Moving forward, more oil than required has been imported while demand has moderated which should see a decline in current account deficit in July.”
