September 27, 2020

Pakistan’s Current Account Deficit reduced by almost 60%

Pakistan’s current government has been continuously working to restrict the Current Account Deficit (CAD) of the country to improve the economic condition of the country. The State Bank of Pakistan released the latest data regarding the CAD situation and according to the data the CAD has reduced by almost 64% for the month of July in FY19 and currently stands at $1.548 billion which was $4.287 billion in the same period last year.

The large decline in the CAD is basically due to the reduced imports, which reduced by almost 19% to $13.461 billion. This massive decline in imports has although positively affected the CAD situation but it has slowed down the country’s economy due to scarce imported raw materials for industry. The exports, on the other hand, increased by a mere 1.38% and amounted to $99 million in July 2019.

The major source of the CD is the high debt servicing issue of the country. Pakistan’s current account deficit was $13.8 billion and the debt servicing alone amounted up to $11.588 billion. With the current government’s increased borrowing, the debt servicing is guaranteed to increase in the coming years. However, the IMF had said in it’s reports that the debt situation of the country would improve gradually. According to the IMF report, the Debt to GDP ratio would decrease from almost 73% in FY20 to almost 62% in FFY24.

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