Pakistan's current account deficit shrank 90% in Jan amid import curbs

Pakistan has a chronic balance of payments problem which exacerbated last year with the country's forex reserves declining to critical levels, Dawn reported. As of February 10, Pakistan's central bank had only $3.2 billion in reserves, enough to cover barely three weeks of imports.

Pakistan's current account deficit shrank 90.2 per cent to $0.24 billion in January from $2.47 billion in the same month last year as import restrictions continue to persist amid a balance of payments crisis that has brought the country on the verge of default, media reports said.

Pakistan has a chronic balance of payments problem which exacerbated last year with the country's forex reserves declining to critical levels, Dawn reported.

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As of February 10, Pakistan's central bank had only $3.2 billion in reserves, enough to cover barely three weeks of imports.

To stem dollar outflows, the government has imposed restrictions, allowing imports of only essential food items and medicines until a lifeline bailout is agreed with the International Monetary Fund (IMF), which is seen as essential for the country to stave off default, Dawn reported.

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Ismail Iqbal Securities' Head of Research, Fahad Rauf, said that shrinking current account deficit is "not an achievement but a result of low reserves".

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The government's strategy to restrict imports in order to safeguard reserves has turned out to be a double-edged sword, however, as several industries rely on imported inputs to continue operations.

As a result, multiple companies across sectors have either suspended operations or scaled down production levels, leading to layoffs, Dawn reported.

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The latest data shows that the country's current account deficit during the first seven months of the current fiscal year stood at $3.8 billion, which equates to a decline of 67.13 per cent compared to July-January FY22.

Also read | Pak govt drops another inflation bomb on masses; petrol up by Rs 22

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In January, $3.92 billion worth of goods were imported, down 7.3 per cent from December 2022. On the other hand, exports also declined, clocking in at $2.21 billion, down 4.29 per cent from the preceding month's $2.31 billion.

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