October current account deficit widens 56% to $567m MoM

KARACHI: Pakistan's current account deficit yawned $204 million or 56% to $567 million for October 2022 as compared to September's $363 million, month-on-month (MoM), while it shrank 68% year-on-year (YoY), primarily owing to a continuous slowdown in imports, remittances.

According to data released by the State Bank of Pakistan (SBP) on Monday, during the first four months of this fiscal year (4MFY23), the current account deficit contracted by 47% year-on-year to $2.821 billion as compared to $5.305 billion during the same period of the previous fiscal.

“The monthly decline in deficit can primarily be attributed to the slump in workers' remittances by 9% month-on-month ($221 million) to $2.216 million,” Spectrum Research, a brokerage house, said in a note.

During 4MFY22 or July-October FY2023, the overseas workers' remittances also deteriorated by 9% or $927 million to $9.901 billion. As the monthly average weakened to $2,475 million from $2.707 million.

“Switching towards informal channels on the higher spread between the inter-bank and open market, massive inflation, and increased interest rates in foreign countries likely weighed on the remittances,” the brokerage said.

However, during the period under review trade deficit narrowed by $79 million or 3% to $2.305 million, whereas exports diminished by 7% year-on-year to $2.282 million, while imports lowered by 5% year-on-year to $4.587 million.

According to the data, the exports of goods increased from $9.56 billion in Jul-October 2021-22 to $9.8 billion in the same period of the current fiscal year.

On the other hand, the imports of goods decreased from $23.32 billion to $20.6 billion in the period under review.

The overall trade deficit also shrank to $10.8 billion in the first four months of FY2023 as compared to the deficit of $13.75 billion in the same period of the previous fiscal year.

Similarly, the trade deficit in services narrowed to $812 million in July-October as compared to $1.3 billion in the same period of the previous year.

The deficit in primary income declined to $1.46 billion in 4MFY23 as compared to $1.5 billion in the same period of the previous year.

The combined deficit of goods, services, and primary income also declined to $13.1 billion in the corresponding period while during the same period of last year, the deficit was recorded at $16.6 billion.

"The shrinking of the import bill was mainly due to a slight dip in international commodity prices, similarly, the government’s moderate import policy also helped cut down the import bill," Spectrum Research said.

As per the last monetary policy, SBP expects the current account deficit would sustain at 3% of GDP during FY2023.