KARACHI: Pakistan’s current account deficit – the gap between foreign expenditures and income – narrowed 39% month-on-month to $623 million in April on the back of historic high workers’ remittances and a reduction in the import bill.
“Current account deficit shrank to $623 million in April 2022; only two-thirds of March 2022 deficit of $1,015 million,” the central bank said on its official Twitter handle late on Thursday.
Current Account Deficit shrunk to $623mn, in Apr 22; only two-thirds of Mar22 deficit of $1015mn. A rise in workers’ remittances (by $315mn) & a fall in imports (by $246mn) explain this reduction. Cumulatively, CAD reached $13,779mn during Jul-Apr FY22.https://t.co/Od8ikVdOd5pic.twitter.com/smhwJlyTZu
— SBP (@StateBank_Pak) May 19, 2022
“A rise in workers’ remittances (by $315 million) and fall in imports (by $246 million) explain this reduction,” it added.
Besides, the export earnings improved from $83 million to $3.15 billion in the month under review compared to $3.07 billion in the previous month.
Workers’ remittances hit a historic high at $3.12 billion in April compared to $2.81 billion in the previous month.
Imports of goods shrank to $6 billion in April compared to $6.25 billion in the prior month.
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However, in the first 10 months (July-April) of the current fiscal year, the cumulative current account deficit soared 27 times to $13.78 billion compared to a mere $543 million in the same period last year.
On a month-on-month basis, April is the second consecutive month when the current account deficit has contracted.
Last month, the central bank reported that the non-oil current account balance remained in surplus for the second successive month in March.
It, however, remained unclear whether the non-oil current account remained in surplus for the third consecutive month as well.
The improvement in the current account deficit had come on a month-on-month basis following restrictions on car financing by banks to reduce imports in September 2021.
Later, the then PTI-led government had increased taxes and duties on imports through a mini-budget in January 2022.
On Wednesday, the new PML-N-led coalition government banned imports of luxury items like cars of over 1,800cc engine capacity, doubled import duty on mobile phones and increased the rate of taxes on imports of dozens of items including cold-rolled steel, tyres and rubber.
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The government estimated that the new measures will help cut the import bill by $500 million a month and further reduce the current account deficit in the coming months.
The government took the measures amid ongoing talks between Pakistan and the International Monetary Fund (IMF) for the resumption of the multibillion-dollar loan programme. The talks are underway in Doha from May 18.