Current account deficit declines by 55pc in first 2 months of FY2020 – Business

The current account deficit (CAD) was reduced by a massive 55 percent in the first two months of the current fiscal year compared to the corresponding period last year, the State Bank of Pakistan (SBP) reported Thursday.

The CAD, for the two-month period, was reduced by $ 1.56 billion to $ 1.29 billion from $ 2.85 billion during the same period last year.

This was in line with the downward trend observed throughout 2018-19 when the deficit remained lower by 31{7be40b84a6a43fc4fae13304fce9a2695859798abfc41afd127b9f8b21c5f9c5} to $ 13.58 billion, from $ 19.8 billion in fiscal year 2018, registering a decrease of $ 6.3 billion.

This should be a relief to the government that has been struggling to cover the deficit through loans from donor agencies, commercial banks and friendly countries.

The main cause of the decline is the decrease in the trade deficit.

According to the commercial summary issued by the Ministry of Commerce during the two months, exports increased to $ 3,738 billion compared to $ 3,650 billion during the same period last year, showing an increase of 2.41 percent or $ 88 million

Similarly, imports for the period under review decreased to $ 7.553 billion compared to $ 9.768 billion during the same period last year, showing a decrease of 22.68pc or $ 2.215 billion.

In total, the trade deficit for the two months of the current fiscal year stood at $ 3.815 billion compared to $ 6.118 billion during the corresponding period of last fiscal year.

The sharp reduction in CAD will also help the State Bank to accumulate its reserves in dollars that have not reached double digits despite the continued entry of friendly countries and donor agencies.

Bankers say that the deficit drop will help bring some stability to the exchange rate and will support both manufacturers that depend on imports and those that are national enough.



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