KARACHI: Pakistan’s present account deficit (CAD) narrowed significantly by 29.5% to $9.6 billion in first 9 months (July-March) of the present fiscal yr primarily on account of much-needed drop in imports and a big rise in employee remittances.
The present account deficit stood at $13.6 billion in the identical interval of earlier yr, the State Bank of Pakistan (SBP) reported on Thursday.
On common, the deficit has dropped to $1.06 billion a month thus far within the present fiscal yr in comparison with $1.5 billion a month within the corresponding interval of final yr.
The central bank stated import of products shrank 5% to $39.three billion in Jul-Mar FY19 in comparison with $41.four billion in the identical interval of final yr.
“Imposition of regulatory obligation on the import of tons of of products and large depreciation of the rupee in opposition to the US dollar and different main currencies made the imports costly. Consequently, the mixture demand for imports decreased,” Rising Economics Managing Director Muzammil Aslam instructed The News Observers.
The central bank has let the rupee depreciate by 16.four% to Rs141.39 to the US greenback within the present fiscal yr in comparison with Rs121.49 on June 29, 2018.
Furthermore, a big discount within the authorities’s improvement funds – known as the Public Sector Growth Programme (PSDP) – and completion of Early Harvest initiatives beneath the China-Pakistan Economic Corridor (CPEC) additionally triggered a drop in import of equipment and gear, he stated.
The drop in import of products additionally triggered a lower within the import of companies by 21.7% to $6.5 billion in Jul-Mar FY19 in comparison with $eight.three billion in the identical interval of final yr. “Pakistan has paid much less for insurance in step with the drop in import of products. This has helped scale back the import of companies,” he stated.
Remittances from abroad Pakistani employees surged 9% to $16 billion within the first 9 months of FY19 in comparison with $14.eight billion in the identical interval of final yr, the central bank stated. “The expansion in remittances got here after monetary establishments and authorities officers stepped up efforts to offer a push to inflows,” a banker stated just lately.
“The State Bank of Pakistan (SBP) and National Bank of Pakistan (NBP) have taken a number of measures, together with the supply of money reward on receipt of remittances by authorized channels. Aside from this, a crackdown has been launched on unlawful hawala/hundi operators and motion taken in opposition to dollar hoarders…these all are optimistic steps to draw larger remittances,” a state-owned bank official dealing in employee remittances stated.
Nevertheless, the overseas direct funding (FDI) dipped 51.5% to $1.three billion in first 9 months of FY19 in comparison with $2.6 billion in the identical interval of earlier yr.
“The drop in overseas funding comes because the native forex (rupee) stays in an adjustment part in opposition to the US greenback, which doesn’t go well with overseas traders,” he stated.
Month-on-month deficit soars
Opposite to the notable drop in present account within the first 9 months, the present account deficit soared 195% to $822 million in March in comparison with $278 million in February.
Aslam stated probably curiosity funds in opposition to the massive amassed overseas debt would have pushed the present account deficit sharply larger in March.
“Pakistan was to pay curiosity on the finish of Jan-Mar 2019 quarter. Pakistan’s overseas debt has surged to $90 billion as of now,” he stated.
The central bank stated the steadiness of commerce in items and companies rose 32.8% to $2.three billion in March in comparison with $1.eight billion in February.