KARACHI: The current account deficit widened to $9.1 billion in the first six months of the current fiscal year, compared to a surplus of $1.2 billion in the same period last year, central bank data showed on Saturday, mostly due to the yawning trade gap. .
The current account deficit is 5.7 percent of the gross domestic product (GDP).
On a calendar year basis, the deficit stood at $12.2 billion in 2021, compared to $245 million a year ago.
According to data from the Pakistan Bureau of Statistics (PBS), the trade deficit, a key component of the current account, widened 106 per cent to $25.5 billion in July-December fiscal year 2022.
The poor performance of the current account in six months is due to large time excess exports of imports. Imports outpaced exports amid a domestic economic recovery from the pandemic and higher global commodity prices.
Goods imports grew 57 per cent to $36.4 billion in July-December FY2022, data from the State Bank of Pakistan (SBP) showed. Exports rose 29 percent to $15.2 billion.
"The current account deficit remained broadly unchanged at $1.93 billion in December from $1.89 billion in November," SBP said in its official Twitter handle.
The fall in December's current account was marginally lower than analysts' estimates. However, the difference between SBP and PBS trade numbers remains. Topline Research said in a note to clients that the import figure given by SBP was $6.5 billion in December, significantly lower than PBS's imports of $7.6 billion.
The year-on-year deficit widened sharply to 207 per cent in December. It came in at $629 million in the same month of FY21. The YoY deficit was mainly due to a 31 per cent increase in imports to $6.5 billion.
However, overall exports also rose 30 percent to $2.92 billion, with remittances from overseas Pakistani workers growing by 3 percent to $2.52 billion.
The country's current account deficit, which was up from $18.9 billion in 2018, is again worrying investors and markets after the rupee depreciated 10 per cent so far this fiscal year amid a fall in forex reserves.
SBP expects a deficit of 4 percent of GDP this fiscal year, while analysts estimate the deficit to be 5 percent of GDP, or $16.8 billion. However, the projected current account deficit raises questions as to how it will be funded.
Pakistan loan repayment for FY2022 is $14.3 billion (including China's $4 billion safe deposit). In the second half of FY 2022, the country has to pay off foreign debt of $ 8.6 billion.
The government is confident of easing macroeconomic concerns and improving current account performance after a possible resumption of the IMF (International Monetary Fund) loan program.
The revival of the IMF bailout is expected to unlock funding from other international financial institutions. The government is also going to issue seven-year dollar denomination sukuk in international debt markets.
“The supply chain disruptions caused by the pandemic will end, and most central banks will end their hyper-accommodative stances in 2022. This means commodity prices will be lower from current levels as we move into the year, and on Account deficit and inflation will improve in 2H2022,” an analyst at Alfalah Securities said in a report.