Pakistan’s current account deficit drops by over 90% amid import restrictions

According to data released by the State Bank of Pakistan (SBP) on Monday, Pakistan’s current account deficit in January 2023 reduced by 90.2 per cent to $0.24 billion, compared to $2.47 billion in the same month last year.

The decrease in deficit is attributed to the persisting import restrictions, which have been implemented due to the balance of payments crisis that has pushed the country towards default.

However, the shrinking current account deficit is a result of critically low forex reserves, which stood at $3.2 billion as of February 10, barely enough to cover three weeks of imports.

To prevent dollar outflows, the government has limited imports to essential food and medicines until the International Monetary Fund (IMF) provides a bailout to the country.

The government’s strategy of import restrictions has affected industries that rely on imported inputs to continue their operations, leading to a suspension of operations or downsizing production levels and causing layoffs.

During January, the country’s imports stood at $3.92 billion, a decrease of 7.3 per cent from the previous month, while exports fell to $2.21 billion, a decrease of 4.29 per cent from December’s $2.31 billion. Workers’ remittances in January 2023 amounted to $1.89 billion, which is a decline of 9.89 per cent compared to December’s $2.1 billion.

During the first seven months of the current fiscal year, the country’s current account deficit stood at $3.8 billion, representing a 67.13 per cent decline from July-Jan FY22.

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