Despite record receipt of exports and all-time high inflows of remittances, the current account posted a deficit of $1.8 billion to close the financial year 2020-21.
The external position is at its strongest in many years. In line with SBP projections, the current account deficit in FY21 fell to only 0.6% of the GDP. This is the lowest in 10 years, with exports and remittances at all-time highs.
The current Account maintained a surplus-value till the 11th month of the outgoing financial year, with stability and encouraging signs for the economy but it surprisingly turned into a deficit in the last month of the financial year. Huge import bills due to higher values of petroleum products and purchase of Covid-19 vaccine translated into a huge gap in the balance of payment.
According to the State Bank of Pakistan (SBP), the current account deficit stood less than 58% or $2.5 billion in FY21, as compared to the deficit of $4.44 billion reported in the last financial year.
The trade deficit of goods is increasing every month which stood at $28.1 billion during July-June, as compared to $21.1 billion recorded in a similar period of last year, showing a $7 billion or 33% year-on-year increase. Hence, the overall trade deficit of goods and services settled above $30.3 billion in FY21 as compared to $24.4 billion recorded in the last financial year.
On the other hand, the trade deficit of the services reduced to $1.87 billion during FY21 from $3.31 billion of the last year’s similar period, reducing by over 50% year-on-year. Hence, the overall deficit stood at $22.7 billion, showing an increase of 43% in deficit value.
Remittances maintained a robust growth where inflows surged to $29.3 billion during FY21, showing an increase of 26% or over $6.2 billion year-on-year. The consistent strong support from overseas Pakistanis through remittances shored up the current account level to retain surplus in the ten months of the current financial year.
State Bank of Pakistan (SBP) projected earlier that the current account deficit of the country will stay up to 1% of the GDP.
The economic managers carried out their all-out efforts to close the financial year on a positive note and succeeded in achieving all-time high export values, remittances, and foreign exchange reserves. However, the current account deficit made a surprisingly negative end.