Current Account Deficit rose to $5.1bn in 4MFY2022

December 1, 2021

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The current account deficit (CAD) increased by 4.7% of GDP to US $ 5.1 billion in the first four months of the current fiscal year , up from US $ 1.3 billion last year (1.4 % Of GDP).

According to the details, the Monthly Economic Review and Outlook for November 2021 released by the Ministry of Finance shows that the deficit rose on the back of rising imports of energy and non-energy goods, as well as world prices for raw materials, COVID-19 vaccine, food and other commodities. minerals.

Imports increased 66% to $ 23.5 billion from $ 14.1 billion in July-October 2021 period, while exports increased 32.2% to $ 9.7 billion over the period under review.

The MoF says Pakistan is experiencing rapid growth while facing ongoing inflationary pressures.

Available cotton crop estimates, as well as recent high-frequency variables, are encouraging and create an optimistic baseline scenario for frowth. However, according to the report, there are some risks to the economy associated with higher global commodity prices, the appreciation of the Canadian dollar and subsequent pressure on the Pakistani rupee.

At the same time, consumer price inflation was recorded at 8.74% in four months of the fiscal year, up from 8.87% in the corresponding period last year. Inflation started to slow down to 11.1% in April, mainly due to lower prices for agricultural products.

The report also says the government’s deficit narrowed to 0.8% of GDP in the first quarter of FY2022, up from 1.1% of GDP in the same period last year. The primary surplus remained in surplus at Rs 184.2 billion, or 0.3% of GDP, in the first quarter of 22, up from Rs 257.7 billion, or 0.6% of GDP, last year.

The report notes that the level and extent of persistent inflation is the result of a deterioration in the aftermath of previous balance of payments crises, exacerbated by accelerating global inflation and exceptional increases in world commodity prices.

These measures should include the Canadian dollar’s manageable share of the current economy. It will also help reduce pressure on the exchange rate and therefore on expected inflation.

In addition, the IMF also acknowledged that, based on available information, strengthening the government’s policy response to the COVID-19 pandemic has helped reduce its impact on humanity and the macroeconomy and thus led to a significant economic recovery.

On the other hand, external pressures are starting to emerge, mainly due to increased economic activity, adaptive macroeconomic policies and the worsening impact of rising global commodity prices. However, government action will ease this pressure in the coming months.