KARACHI: Pakistan’s monthly current account deficit (CAD) hit an all-time high of $2.55 billion in January from $219 million in the same month last year, mainly driven by rising imports amid higher commodity prices. raw Materials.
As of December 2021, the CAD was $1.9 billion.
However, rising imports coupled with a rapid rise in oil prices all but destroyed the struggle to take the CAD from a high of over $20bn in 2018. The data shows that oil imports Oil imports were the main item driving up the bill, but services imports also increased by 39% to $6.174 billion compared to $4.426 billion in the same period last year.
Balance of Payments (BOP) data released by the State Bank of Pakistan (SBP) on Thursday showed the country’s CAD rose to $11.6 billion during the first seven months of 2021-22 against a surplus of $1.028 billion in 7MFY21.
Although the government took a series of measures to reduce the import bill, it failed. The goods and services trade deficit increased to $27.35 billion in 7MFY22 from $14.81 billion in the same period last year.
The CAD has been rising despite the much better performance of the export sector, while remittances also remained intact. Total exports increased 25% during 7MFY22 compared to the same period last year.
The export of goods and services during July-January of fiscal year 22 was $21,660 million compared to $17,235 million, an increase of $4,432 million or 25 percent.
Imports of goods and services increased 53pc to $49.017bn in 7MFY22 against $32.053bn in the same period last year.
The government is desperate for the growing size of the current account deficit and has been forced to borrow more to cover external account expenses. Although foreign investment in the country remained low in recent years, it was unable to increase exports to a significant amount to offset the huge trade gap.
The trade gap of more than $27 billion requires Pakistanis abroad to send almost all remittances, but debt services still require about $13-$15 billion this year. The government is hoping to receive around $30 billion through remittances by the end of this fiscal year FY22, while it has already received $18 billion in 7 months.
Analysts believe that the country could receive the expected remittances, but the growing current account deficit is worrying for him.
Reservations below
The State Bank of Pakistan’s (SBP) foreign exchange reserves decreased by $289 million to $16,806.5 million in the week ending February 18, compared with $17,095.8 in the previous week, the central bank said on Thursday.
The country’s general reserves also fell to $23.22 billion during the week from $23.49 billion, while commercial banks’ foreign exchange holdings improved to $6.41 billion from $6.39 billion.
$4 billion paid in debt service
Pakistan has paid more than twice as much in the second quarter of the current fiscal year as external debt service compared to the first quarter of FY22, State Bank reported on Thursday.
The country paid $4.074 billion in debt services during October-December of fiscal year 22 against $1.659 billion in the first quarter of the same period.
At the start of the current fiscal year, the government had said the country would need some $20 billion for debt service. Under the huge debt burden, rising import bill and widening current account deficit, debt servicing could be a serious problem for the government already in the clutches of the IMF.
Savers withdraw funds
The National Savings Scheme is no more attractive to the government as it has not been able to mobilize liquidity through the schemes.
The latest semi-annual data, July-December FY22, shows that the net outflow reached Rs 104.3 billion compared to an outflow of Rs 9.9 billion in the same period last year.
However, the government introduced a cut during the current month in the benefit rates of the NSS, which inflicted on the interested parties, especially when inflation is high and the policy interest rate also increased last month.
The government has prohibited financial institutions and the corporate sector from investing in the NSS, which resulted in an investment, while the institutions also began to withdraw their investment.
On February 4, the rates of all schemes were revised. Fees for Defense Savings Certificates (DSCs), Bahbood Savings Certificates (BSCs), Pension Benefit Accounts (PBAs), Shuhada Family Welfare Accounts (SFWAs), Regular Income Certificates ( RIC), Short-Term Savings Certificates (STSC), Savings Certificates (SSC), Special Savings Accounts (SSA) and Savings Accounts were revised downwards.
The rate of return on the Regular Income Certificates (RIC) fell by 48 basis points to 10.32 percent; The Behbood Savings Certificates (BSC) rate was reduced by 72 basis points to 12.24 percent, and the Special Savings Certificates (SSC) utility was reduced by 40 basis points to 10 percent.
Posted in Alba, February 25, 2022