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Pakistan’s current account deficit shrinks by 45% to $1.2bn

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  • Decline in current account deficit largely reflects a sharp decline in energy imports.
  • “Narrower deficit is the result of wide-ranging measures taken in recent months,” SBP notes.
  • Primary reason behind yearly deficit is a decline in remittances.

KARACHI: The three-month import ban imposed by the coalition government bore fruits as Pakistan’s current account deficit — the gap between the country’s higher foreign expenditure and low income — shrank by a massive 45% month-on-month.

The current account deficit clocked in at $1.21 billion in July 2022 in comparison to a deficit of $2.2 billion (revised figure) in June, data released by the State Bank of Pakistan (SBP) showed.

“The current account deficit shrank to $1.2 billion in Jul from $2.2 billion in June, largely reflecting a sharp decline in energy imports and a continued moderation in other imports,” the central bank said in a brief note released on its Twitter handle.

“The narrower deficit is the result of wide-ranging measures taken in recent months to moderate growth and contain imports, including tight monetary policy, fiscal consolidation and some temporary administrative measures.”

On a year-on-year basis, the primary reason behind the deficit was an 8% (yearly) decline in remittances along with a 0.4% (year-on-year) increase in total imports to $6.2 billion.

However, total exports increased by 4% year-on-year during July. Data showed that imports of goods stood at $5.39 billion in July, compared to $7.03 billion in June. At the same time, imports of services stood at $790 million in July compared to $1.32 billion in June.

Previously, widening the current account balance being an important indicator of Pakistan’s economy led to an outflow of US dollars, which had put additional pressure on the currency that has continued to struggle against the greenback.

SBP, PBS trade figures reveal discrepancies

However, the SBP and Pakistan Bureau of Statistics (PBS) trade figures revealed discrepancies. The data available showed that SBP imports exceed PBS imports in the first month of the fiscal year (July) — “a seldom event seen historically”.

According to the data released by the central bank, the total imports of the petroleum group clocked in at $2.4 billion while the figures of the bureau highlight the amount of $1.4 billion — reflecting a difference of $984 million.

Similarly, for the textile group, SBP data showed that the imports were around $379 million while PBS said that the imports clocked in at $309 million — which calculates to a difference of $70 million.

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The gold price in Pakistan today

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According to the All Sindh Sarafa Jewellers Association, the price of 10 grammes of 24 karat gold increased by Rs772 to Rs184,928 from Rs184,156, while the price of 10 grammes of 22 carat gold increased to Rs169,517 from Rs168,810.

These oscillations are strongly correlated with shifts in the US dollar’s value, demonstrating the complex interplay between gold prices and exchange rates.

This emphasises how local gold prices are impacted by events related to the global economy.

On the other hand, the cost of 24-karat silver was constant at Rs 2,570. Globally, too, the price of gold increased somewhat by $9 to $2,057 per ounce.

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Pakistan receives a $2 billion loan from China, according to the finance minister

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The $2 billion loan was one year ahead of schedule and became due in March. According to reports, Beijing had informed Islamabad of the decision.

The International Monetary Fund granted Pakistan’s cash-strapped economy a $3 billion standby arrangement last summer, but the country is still battling to recover from the financial crisis.

According to ratings firm Fitch, one of the top concerns confronting the next administration would be obtaining funding from bilateral and multilateral partners due to Pakistan’s precarious foreign situation, as was stated last week.

This event occurs one month after Anwaar-ul-Haq Kakar, the acting prime minister, asked for a $2 billion loan to be rolled over for a year in a letter to his Chinese counterpart.

In his letter, Kakar also expressed gratitude for China’s efforts to lessen Pakistan’s load

of foreign payments.

It is to be noted that Pakistan acquired safe deposits of $4 billion from China to address the balance of payments issue.

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“Ready to work with Pakistan’s new government,” the IMF said.

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In response to the former premier’s request, IMF Director of Communications Julie Kozak stated, “I’m not going to comment on ongoing political developments,” during a news conference.

She continued by saying that they “look forward to working on policies to ensure macroeconomic stability and prosperity for all of Pakistan’s citizens with the new government.”

In addition to stating that the plan is “supporting the authority’s efforts to stabilise the economy and to, of course, with a strong focus on protecting the most vulnerable,” Kozack said the lender increased the total disbursements under the Standby Arrangement (SBA) to $1.9 billion.

This has been accomplished by closely adhering to budgetary constraints and safeguarding the social safety net. In order to keep foreign exchange reserves growing and rein in inflation, a strict monetary policy stance has been maintained, the speaker stated.

The PTI founding chairman decided to write a letter to the international lender, asking it to demand an audit of the election held on February 8 before it proceeds with discussions with Islamabad for a new loan programme. This move prompted the IMF to release its statement.

In response to the former premier’s request, IMF Director of Communications Julie Kozak stated, “I’m not going to comment on ongoing political developments,” during a news conference.

She continued by saying that they “look forward to working on policies to ensure macroeconomic stability and prosperity for all of Pakistan’s citizens with the new government.”

In addition to stating that the plan is “supporting the authority’s efforts to stabilise the economy and to, of course, with a strong focus on protecting the most vulnerable,” Kozack said the lender increased the total disbursements under the Standby Arrangement (SBA) to $1.9 billion.

This has been accomplished by closely adhering to budgetary constraints and safeguarding the social safety net. In order to keep foreign exchange reserves growing and rein in inflation, a strict monetary policy stance has been maintained, the speaker stated.

The PTI founding chairman decided to write a letter to the international lender, asking it to demand an audit of the election held on February 8 before it proceeds with discussions with Islamabad for a new loan programme. This move prompted the IMF to release its statement.

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