Govt’s Current Account Deficit Reduction in FY19 Was More Than the IMF Bailout Package

iltaf

Minister (2k+ posts)
The current account deficit has recorded a massive reduction of $6.3 billion in the closing financial year 2018-19 mainly due to the gradual control over imports and an increase in the inflows of remittances throughout the year.



According to the data released by State Bank of Pakistan (SBP), the current account deficit reduced from $19.89 billion to $13.58 billion.

The reduction in current account deficit value, is more than the $6 billion bailout package signed with International Monetary Fund (IMF) however the incumbent government missed the highly ambitious target to contain the deficit to $6 billion.

The government took strict measures to improve the ballooning deficit over the period while it did succeed to a great extent, it will likely reap benefits to the economy in the current financial year as well.

The imports of luxury items were reduced through high regulatory duties by the government. The government tightened the policy of imports on luxury cars and use of banking services such as credit cars for international transactions.

The overall imports of goods and services saw a drop of over $6 billion which made a difference in the balance sheet of the country. Disappointingly, exports of goods and services did not show any growth in FY19, which is a major concern for the economy.

On the other hand, the government also introduced incentivized services for expatriates supporting remittances to Pakistan, which bode well as the remittances from various countries recorded an all-time high of over $21 billion in FY19.

What’s Next?
The government is taking all possible measures to curtail the imports bills and the imbalance for the payments. Some of the measures will reap the benefit to the economy in the coming years.

The deferred payment facility signed with Saudi Arabia’s government is one of the factors to reduce the deficit. Besides, the currency swap agreement with China may also help the government in reducing the deficit as well. The exports might perform well in the next few years supported by the measures of the government and the remittance inflows will improve further to narrow down the deficit.

These factors will collectively help improve the balance of payment situation of the country and the target to reduce it to $6 billion might be attained by next year.

 
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karachii

Minister (2k+ posts)
"The deferred payment facility signed with Saudi Arabia’s government is one of the factors to reduce the deficit" it only started from July 1st, again wrong reporting.

A deliberate move to slow the economy and higher exchange rate is the main reason for reduced CAD. We were sitting on time bomb in shareef Era which exploded with the economic mess we are in right now.

It will take further 3 years to stablised economy as we have to pay loans, our export will also not rise in these 3 years due to taxes government has to put on those 0 rated sectors.

LETS HOPE THIS ECONOMIC TEAM DELIVER
 

Vertex

Councller (250+ posts)
KARACHI: Pakistan’s current account deficit narrowed 32% to $13.59 billion in the fiscal year ended June 30, 2019 mainly due to a notable growth in inflow of worker remittances and reduction in import of goods and services.



However, the country failed to achieve the deficit target both in relation to the country’s gross domestic product (GDP) and in total amount.

The deficit came in at 4.8% of GDP worth $283.9 billion compared to the target of 4% for FY19. In terms of total amount, the government had targeted to restrict the deficit to $13.3 billion, according to the Planning Commission.

“The current account deficit has dropped but it still remains elevated,” Arif Habib Limited Head of Research Samiullah Tariq said while talking to The Express Tribune.
“This is unsustainable,” he said. “If it remains elevated in the current fiscal year as well, it will keep mounting the pressure on the rupee (against the dollar).”

The deficit beat the target mainly due to the disappointing export of goods, which slipped to $24.21 billion against expectation for around $28 billion, after the central bank let the rupee depreciate 32% to Rs160.05 against the US dollar in FY19.

In remarks made in the past few days, State Bank of Pakistan (SBP) Governor Reza Baqir said depreciation of the rupee and hike in key interest rate had helped in contraction of twin deficits – the current account and fiscal deficits – significantly.

“The current account deficit has dropped to $1 billion a month (in FY19) compared to $2 billion a month last year,” he said. Exports have improved in volumes but not in value. “Textile exports have (alone) increased around 30%,” he said.

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“The current account deficit has remained in the economy due to increase in international petroleum oil prices in recent months,” he added. “Non-oil current account deficit has reduced to almost zero,” Baqir said.

Pakistan has remained a net oil importing country to meet domestic requirement. Oil imports come to around one-fourth of the total import bill of goods valuing at $52.43 billion in FY19.

The central bank data suggested that the authorities concerned had revised up the current account deficit for the prior fiscal year 2017-18 twice during FY19. They revised up the deficit by a cumulative $1.9 billion to a record high at $19.89 billion for FY18 compared to around $18 billion provisionally reported in July 2018.

“The deficit was revised upwards after the government adjusted import numbers related to the China-Pakistan Economic Corridor (CPEC),” said the head of research of Arif Habib Limited.

He said growth in exports was a must to push down the current account deficit to the target of $8.5 billion for the current fiscal year, which started on July 1, 2019.
Besides, the country had to extensively work on finding import substitutes and achieving energy efficiency to further cut imports in the current fiscal year, he said.


The export of goods slipped 2.22% to $24.21 billion in FY19 compared to $24.77 billion in the preceding year, the SBP reported.The inflow of remittances from overseas workers increased around 10% to $21.84 billion in FY19 compared to $19.91 billion last year.
The import of goods decreased 7.34% to $52.44 billion compared to $56.59 billion in FY18.

Import of services shrank 16% to $9.55 billion compared to $11.36 billion in FY18.
The higher current account deficit was partially financed through the country’s foreign currency reserves. Accordingly, they persistently remained insufficient, especially in the past one year, despite borrowing $9.7 billion from friendly countries including China, Saudi Arabia, the United Arab Emirates and Qatar and receipt of the International Monetary Fund’s (IMF) first loan tranche of $991.4 million during the year.
Published in The Express Tribune, July 18th, 2019.

URL unfurl="true"]https://tribune.com.pk/story/2015613/2-current-account-deficit-contracts-32-13-59b/[/URL]
 

iltaf

Minister (2k+ posts)
Ye sabse important news hae lekin adhi se zaada awaam ko ye baat samhaj bh ayegi
Ye kaam media ka (jo khud ko jamhoriat ka 5th satoon smjhti h jb unky apny kaam nikalny hoty h) h par media ko aisy news me interest ni hota. You know the reasons.
 

gumnam

Politcal Worker (100+ posts)
Ye kaam media ka (jo khud ko jamhoriat ka 5th satoon smjhti h jb unky apny kaam nikalny hoty h) h par media ko aisy news me interest ni hota. You know the reasons.
Yes this subject can be known by every layman if the media propogates this. Pakistani media is a major reason for our decline
 
Also, exports have increased in terms of volumes. The monetary value of those exports didn't show much difference because of the devaluation of PKR, but the volume of exports did increase quite reasonably.
 

arafay

Chief Minister (5k+ posts)
I think exports increased as well but business showing exports proceeds as remittance to avoid taxes. It doesnt make sense why remittance increased so much in one year considering the low oil prices and poor job market in middle east where most pakistani expats work.
 
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