The current account deficit (CAD) of Pakistan for the month of June stood at $2.28 billion, up by 59% as compared to the figure recorded in May, cumulatively clocking in the full-year deficit at $17.4 billion.
The massive current account deficit compared to a gap of just $2.82bn in FY21 speaks a lot about the serious balance of payments issue, resulting from surging import bills.
Earlier, the PML-N-led coalition government had posted a current account deficit of $4.323bn in the April-June period of 2021-22, which was the second highest quarterly deficit of the fiscal year that ended June 30.
The current account deficit increased to 4.6% of GDP in FY22, up from 0.8% in FY21, exceeding the State bank’s projection for the deficit in the fiscal year 2021-22. The central bank in its Annual Report issued in November 2021 had projected the current account deficit to be in the range of 2% to 3% of GDP in FY22.
The deficit of over $17.4bn is more serious on account of no inflows as loans while the commercial markets are not ready to accept Pakistan’s bonds due to higher risks.
Record Import and Fuel Purchase
According to the data shared by the central bank on Wednesday, Pakistan hit record monthly highs for imports and petroleum-related purchases in June as the country battles to avert a full-blown economic crisis.
“As foreshadowed by earlier PBS data, a surge in oil imports saw CAD rise to $2.3bn in Jun despite higher exports & remittances. So far in Jul oil imports are much lower & deficit is expected to resume its moderating trajectory,” said the statement issued by the central bank.
The report noted that 3.3mn metric tons of oil was imported in June, 33% higher than in May.
Imports of goods stood at $7 billion in June, of which the petroleum group, which includes fuels, was $2.9 billion.
“Together with higher global prices, this more than doubled the oil import bill from $1.4bn to $2.9bn. By contrast, non-oil imports ticked down.”
However, the SBP has said that oil imports thus far in July are much lower and the deficit is expected to moderate.
What is Current Account Deficit?
The current account deficit is when a country imports more goods, services, and capital than it exports.