KARACHI: Pakistan’s current account deficit surged by 131 percent month-on-month in May, as remittances and exports fell, outpacing a slight decrease in imports, the central bank data showed on Tuesday.
The current account gap rose to $1.4 billion in May from $618 million a month ago. It widened by 123 percent year-on-year. The deficit stood at $640 million in May 2021.
Pakistani citizens employed abroad sent home $2.3 billion in remittances in May, down from $3.1 billion in April, and exports of goods declined 21 percent to $2.5 billion.
On a positive note, imports dropped 6 percent MoM to $5.7 billion in May.
Overall imports fell compared to April; however, a decline in remittances and exports on account of the Eid holidays contributed to the rise in the current account deficit, the State Bank of Pakistan said on its official Twitter handle.
“Moreover, excluding in-kind imports that are fully financed and thus do not undermine the sustainability of the CAD, the deficit was more modest at $1 billion,” it added.
The deficit widened to $15.2 billion in 11 months of this fiscal year from $1.2 billion a year earlier. A steeper increase in July-May FY2022 current account deficit is led by a surge in the trade deficit, which rose 58.18 percent to $43.4 billion.
Total imports increased 36 percent YoY to $65.4 billion in July-May FY2022 mainly due to higher oil imports, the SBP data showed. Petroleum imports soared 86 percent to $15.8 billion followed by agriculture and other chemical imports, which stood at $9.7 billion in July-May FY2022, compared with $7.5 billion in the same period of last fiscal year.
However, exports rose 27 percent to $29.3 billion, and remittances increased 6 percent to $28.4 billion.
Analysts said the latest balance of payments numbers put pressure on the currency and the foreign exchange reserves as the global oil prices surge.
However, hopes for the resumption of the International Monetary Fund programme after the government received a memorandum of economic and financial policies from the lender for combined seventh and eighth reviews on the Extended Fund Facility, would help ease pressure on the forex reserves.
“The SBP’s forex reserves dropped by $1.1 billion to $9.4 billion in May and have declined further to $8.2 billion as of June 17,” said Fahad Rauf, the head of research at Ismail Iqbal Securities.
“However, a Chinese loan of $2.3 billion and expected IMF tranche of $1.9 billion would support the reserves in the near-term,” Rauf added.