KARACHI: The crucial current account deficit (CAD) shrank by another 31.7 per cent in the July to Jun period according to latest data released by the State Bank on Wednesday. The CAD came in at $13.587 billion in this period where it was $19.897bn in the same period last year. It has now fallen to 4.8pc of GDP for July to June this year from 6.3pc last year.

The CAD has been at the heart of the erosion of the country’s foreign exchange reserves that eventually forced the government to seek an IMF bailout.

But not all was good news. The data showed that exports of goods actually shrank by $500 million from same period last year, coming in at $24.217bn where they were $24.768bn in FY2018. This was a 2.2pc deceleration in exports from a 12.6pc acceleration in their growth last year. Out of this, $200mn shrinkage in exports of goods came in the month of June compared to the same month last year.

Imports of goods shrank even faster at 7.3pc or by $4.156bn, coming in at $52.436bn in July to June 2019 compared to $56.592bn in the same period last year. According to the State Bank’s third quarterly report released a few days ago, a large part of the fall in imports is attributable to the end of machinery imports as the early harvest phase of CPEC draws to an end, followed by falling oil prices and restrained imports of LNG for a number of months when power generation was suppressed.

Balance of trade in services also showed a contraction of $1.803bn, entirely on the back of imports falling from $11.356bn to $9.55bn in the period being reported.

Workers remittances rose by $1.928bn in the same period, coming in at $21.842bn for the period July to June 2019.

The capital account showed rising external indebtedness of the country which incurred massive net liabilities of $12.048bn this year where the same figure was $8.855bn for the period last year. Of these, $5.495bn were incurred by the central bank and $3.904bn by the central government.Unclassified liabilities were $2.016bn, where they stood at $494 million in the same period last year.

Published in Dawn, July 18th, 2019