Pakistan’s current account deficit climbs to $17.4 billion
Despite Pakistan’s multiple measures, its current account deficit soared to $17.4bn, or 4.6pc of the size of the economy in the last fiscal year, due to the widening trade deficit. . This comes amid a spike in international commodity and oil prices, which means Pakistan will have to spend more on its energy and other imports, Dawn reported.
Rising prices and a 33% rise in the oil group’s imports more than doubled the country’s oil import bill, which jumped from $1.4 billion in May to $2.9 billion in June, it said. indicated the central bank, and widened the trade deficit from one month to another. by 27 pc, despite a drop in non-oil imports. A growing current account deficit amid depleted dollar inflows from multilateral and bilateral lenders, as well as declining foreign investment have put enormous pressure on foreign exchange reserves and the rupee in recent months,
It fueled rapid inflation, forced the State Bank to raise borrowing costs to multi-year highs and eroded investor confidence in the economy, Dawn reported. Finance Minister Miftah Ismail recently said a policy plan would soon be in place. “Imports will gradually decrease and exports will increase organically within three months,” he said without giving further details.
The State Bank is also hoping for a moderation in the current account starting this month. The “…surge in oil imports caused the current account gap to rise to USD 2.3 billion in June despite rising exports and remittances. So far in July, oil imports are much lower (due to record inventory accumulation) and the deficit should resume its moderating trajectory,” the bank tweeted. With the IMF expected to release its funds soon, thereby unlocking additional financing from other multilateral and bilateral creditors, Pakistan’s external sector could likely recover in the short term, Dawn reported.
However, worsening political unrest is raising doubts about the government’s ability to make tough decisions going forward and tackle the long-standing structural problems in the economy responsible for the recurring balance crisis. payments. Additionally, global credit rating agencies such as Fitch and Moody’s have also cited political risks to Pakistan’s ability to maintain a credible political trajectory.
Meanwhile, S&P Global, a US credit rating agency, has downgraded Pakistan’s credit outlook to negative and markets believe Pakistan may soon follow Sri Lanka in default and economic crisis. In a statement released by the credit agency on Thursday, it was pointed out that Pakistan could be downgraded if support from bilateral and multilateral lenders erodes rapidly or if usable foreign exchange reserves dwindle further.
Furthermore, the outlet, while citing other foreign outlets, said the company also confirmed the country’s rating at B-, tied with Ecuador and Angola. The Pakistani Rupee hit a new all-time high and saw a huge drop against the US Dollar. The rupee has seen a stunning low with more than 30% of its value lost against the dollar this year.
The dollar hit a new high of 240 rupees after the rupee fell another 3.92 rupees per dollar in the interbank market on Thursday. (ANI)
(This story has not been edited by the Devdiscourse team and is auto-generated from a syndicated feed.)