Pakistan’s current account (CAD) deficit narrowed to $74 million in February 2023 from $230 million in January due to import restrictions and increased remittances.
In a tweet, the State Bank of Pakistan (SBP) said: “CAD posted $100 million in February 2023 against a deficit of $0.5 billion in February 2022. Cumulatively, CAD declined to $3.9 billion in July-February 2023. fiscal 23 compared to a deficit of $12.1 billion. in July-February of fiscal year 22”.
In a report, Arif Habib Limited (AHL) stated that the deficit was the lowest monthly figure since February 2021.
He added that year-over-year, the main reason behind the decline in the deficit for the first eight months of the 2022-23 fiscal year was a 24% decline in total imports. However, total exports and remittances also decreased by 19% and 9%, respectively.
speaking to business registrarAHL research chief Tahir Abbas said the deficit in February was much lower than in January due to a 5% rise in remittances, while imports remained stagnant.
“However, there was a 1% monthly drop in exports,” he said.
Alpha Beta Core CEO Khurram Schehzad said business registrar that the CAD was falling “due to import restrictions and the current numbers are not realistic or market driven.”
He stressed that banks were not opening letters of credit (LC) because imports were affected and resulted in a lower deficit.
“If the restrictions continue, Pakistan may also report a current account surplus, but this step is abnormal and the CAD number is unsustainable,” he stressed.
Last year, Pakistan took steps to restrict imports when the country’s foreign exchange reserves were depleted to critical levels.
Islamabad is currently in talks with the International Monetary Fund (IMF) for the resumption of the stalled Expanded Facility Fund (EFF). However, the fate of the deal still hangs in the balance.
The resumption of the IMF program would also unlock other avenues of financing for Pakistan.
Lately, loan inflows from Chinese institutions have helped support Pakistan’s foreign reserves.