Pakistan’s Current Account Deficit at $662mn in December 2020

January 21, 2021

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Pakistan’s recorded Current Account deficit of $ 662 million in December-2020, according to data released by the State Bank of Pakistan.

The current account deficit was witnessed after consecutive six months of Surplus. As compared to December, CA posted a surplus in November amounting to $ 513 million. The data showed that the monthly deficit increased more than 130 per cent year on year.

The deterioration in the current account is the result of a sharp rise in imports. During December, imports of goods amounted to $ 5 billion, which is $ 940 million, or 23 percent, more than the previous month. The growth of imports of goods last month was more than 32 percent year on year.

In contrast, merchandise exports in nominal terms rose 0.6%, leading to a deterioration in the merchandise trade balance by more than 50% in December.

The current account position reflects the total volume of a country’s transactions with the rest of the world. The deficit indicates that the country is a net Importer i.e More US Dollars leave the country as compared to what country receives.

Overall, the current account had a cumulative surplus of USD 1.13 billion for the period July-December 2020, compared with a deficit of more than USD 2 billion in the corresponding period of the previous year.

However, according to the SBP, for the first time in a decade, the country recorded a current account surplus for two consecutive quarters. Due to Lockdowns and resultant slow down in the economy, Pakistan has witnessed a Suppressed level of Import in Past Six months. However, analysts believe that Imports are expected to rise significantly as the economy gains traction. Government’s major achievements on the economic front have been controlling the accelerating current account deficit.