Pakistan CAD slides to $0.2bn in January

Pakistan’s current account deficit (CAD) has reduced to $0.2 billion in January 2023, marking a 90% decline from last year, as per the central bank’s announcement on Monday. The reduction was due to the depreciation of the Pakistani rupee, which slowed down imports. The government has taken steps, such as fuel price hikes, to access funds from the International Monetary Fund (IMF) bailout. Since the removal of artificial caps, the country’s currency has fallen more than 25% in less than a month.

According to the central bank’s data, the current account deficit decreased by 67% to $3.8 billion in the first seven months of the current fiscal year, as opposed to a deficit of $11.6 billion during the same period last year. Mohammad Sohail, CEO of Topline Securities, stated that the monthly deficit was “lower than expectations,” as it is the lowest in 25 months, and the currency has also decreased. The devaluation of the Pakistani currency has made imports more costly, resulting in lower import volumes.

The head of research at Arif Habib Limited, Tahir Abbas, reported that the machinery and transport group imports had decreased by 47% and 61%, respectively, due to strict administrative steps taken by the State Bank of Pakistan (SBP) and an economic slowdown. The SBP had implemented stricter regulations to limit imports of non-essential items.

The government’s efforts to narrow the CAD are paying off, and the data reflects a positive trend. The reduction in the deficit has made Pakistan’s external sector more stable, and the country may be able to repay its debts with greater ease. The government aims to reduce the deficit to $6.5 billion this fiscal year, and the latest figures indicate that it is on track to achieve this goal.