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.

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".

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.

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.

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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.