KARACHI: The country’s current account deficit narrowed to $3.28 billion in the first eleven months of current fiscal year, while declining sharply in May.

The State Bank of Pakistan (SBP) on Wednesday said the account posted a surplus of $13 million in May against a deficit of $350m in April.

The government has been working hard to bring down record-high the $20bn deficit in FY18 to more manageable levels. During July-May, the deficit fell by 73.6 per cent compared to $12.453bn in the same period last fiscal year. The sharp reduction in import bill led to the narrowing of fiscal deficit in the current fiscal year as exports showed lackluster growth despite government’s incentives to the export-oriented sectors.

The data released by the Pakistan Bureau of Statistics (PBS) showed export of goods fell to $20.9bn, down from $22.5bn in the last fiscal year. Meanwhile, imports fell to $38.9bn from $47.8bn last year.

Bankers said the import bill is expected to be much higher in June as importers are rushing to buy petroleum products due to the fuel shortage in the country. The country is facing a shortage of petroleum products due to delayed decisions regarding import of petroleum products amid uncertain demand.

They further said that due to this sudden increase in buying, the demand for dollars has shot up and rupee has fallen to record low against the dollar in the interbank market.

Despite successful reduction in current account deficit, the economy’s external front continues to tread on weak ground. Despite support from G20, the International Mon­etary Fund and the Asian Development Bank, the foreign exchange reser­v­es of the SBP have depleted. More than 50pc reserves of the SB­P depend on temporary support from Saudi Arabia and Qatar.

The government is trying to increase exports but the global recession caused by the coronavirus has left no additional space for the country’s exports to grow. The country has relied heavily, more than export proceeds, on remittances to shore up foreign exchange reserves.

So far, remittances have shown significant growth but the economic situation in gulf countries — top destination for inward remittances into Pakistan — is extremely volatile.

The sharp slump in global demand for oil and delay in infrastructure projects due to the Covid-19-led shutdowns have slowed down the economic activity in the Gulf region. The employment outlook for Pakistan workers in the region looks extremely bleak amid reports of layoffs.

Remittances are one of the major sources for forex earnings for Pakistan as the country received more than $20.65bn during the current fiscal year.

Published in Dawn, June 25th, 2020