Current account posted a $1.47 billion deficit during the August-2021 of the current fiscal year (FY22) due to a higher import bill.

The trade deficit increased massively to $4.06 billion in August 2021 from $1.74 billion in the same month last year, as per the provisional data.

The higher import payments led the increase in current account deficit. The country’s imports are increasing due to rise in domestic activity and higher global commodity prices.

The State Bank of Pakistan (SBP) on Friday reported that the country recorded a current account deficit of $1.476 billion in August-2021 compared to a $841 million deficit in July 2021.

Government revised the Current Account deficit figure of July-2021. Previously, the CAD of July-2021 was reported at $773mn, which nos stands revised at $841mn.

Cumulative CA Deficit for first two months of the fiscal year 2022, stands at $2.3bn.

On month-on-month basis the current account deficit rose 76 percent in August 2021 as against July 2021. As per the SBP, the deficit, in the first two months of this fiscal year, is in line with SBP’s expectations of a current account deficit of 2-3 percent of GDP for FY22 as economic activity continues to progress. This will lead to a cumulative Current Account deficit of roughly $7bn -8bn in FY2022.

SBP believes that with robust FX reserves buffer and stable outlook for Remittances and Exports, the economy will smoothly brave the shock of Current Account Deficit.

As a result of significant Current Account Deficit, Rupee has been under pressure since July, and has shed more than Rs.16 against a dollar in Inter-Bank FX Market.

The Pressure on Rupee is evident and further depreciation against US Dollar cannot be ruled out.

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