ISLAMABAD - Pakistan’s current account deficit has fallen to 21-month low of $242 million in January this year, which has slightly eased the pressure on the country’s foreign exchange reserves. The current account deficit was recorded at only $242 million in January this year as compared to $2.5 billion in the same month of the previous year, according to the latest data of State Bank of Pakistan (SBP). Meanwhile, it has plunged by 17 percent to $242 million in January 2023 as against $290 million in the preceding month (December). The current account deficit decreased by 67 percent to $3.8 billion during the first seven months of the current fiscal year as compared to $11.6 billion during the same period of the last year. The current account deficit has narrowed mainly due to the reduction in imports. The data showed that country’s imports have declined to $33.5 billion in July–January period of the current fiscal year from $42.3 billion in the same period of the previous year. Meanwhile, exports were recorded at $16.4 billion in the seven months of the ongoing financial year as compared to $17.7 billion in the corresponding period of the last year. Similarly, the foreign remittances have declined to $16 billion in July-January period of the year 2022-23 from $17.99 billion in the same period of the previous year.
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The current account deficit has narrowed at the time when country’s foreign exchange reserves held by the central bank are around only $3 billion, only enough to cover three weeks of imports. The government is current negotiating with the International Monetary Fund (IMF) to revive the much needed loan programme. The revival of IMF programme would release one billion dollars loan tranche for Pakistan but it would also pave way for getting loans from other bilateral and multilateral sources. The ministry of finance in its monthly report had noted that the current account deficit may decline in January and stabilize during second half of FY2023 with the expected improvement in the trade balance due to prudent government measures. The current account balance slightly deteriorated in the month of December. This was mainly due to an increase in primary income payments and a decrease in remittances. “Exports are constrained by domestic production issues related to the slowdown of demand in the main export markets and high domestic production costs. Imports are currently constrained by sluggish domestic demand and administrative measures to protect the official foreign reserves level. Since no immediate reversal of these developments is envisaged, the trade balance may further stabilize or further improve somewhat in the upcoming months”, the ministry noted.
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