September 28, 2020

Current Account Deficit Decreases By 72pc For The Month Of July

On Tuesday 20th of August 2019, the State bank of Pakistan reported a 72.8pc decrease in the Current Account Deficit (CAD), for the month of July, which stood at $579 million, as compared to the $2.13 billion deficit for the same time period of FY 2018-19. The deficit also reduced 37pc as compared to the previous month of June 2019, from $921million to $579 million. Experts believe that the government’s strict policies to reduce imports and increase exports resulted in this decrease in CAD. The CAD had been declining continuously for the last year. It stood at $19.8 billion in FY18 and reduced to $13.58 billion in FY19 and is continuing to decrease even further.

Financial experts believe that if the government manages to bring the deficit down to a single figure by FY20, then it will become manageable for the country.

The country’s export data for July shows that the exports increased by 10pc to $2.33 billion from $2.01 billion, whereas the imports declined to $4.08 billion from $5.497 billion, as compared to the same time period last year. The balance of trade also saw a decline of 8.5pc from the previous year’s levels, from $517 million in the same month last year and currently stand at $473 million.

Business associations claim that the government’s policies to reduce imports would also harm the country’s economy, as a large portion of the industry is reliant on imported material for operations. They added that this might decrease the efficiency of the industry, which at the end of the day would affect the exports of the country as well.

However, many financial experts claim that the decreased CAD would bring some stability to the Pakistani Rupee and that would, in turn, have a positive effect on the whole business sector.

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