Current Account Posts a Huge Deficit In May 2021

The Current Account recorded a huge deficit of $632 million in the month of May according to data reported by the State Bank of Pakistan (SBP).

The deficit was reported due to a staggering decline in exports due to partial lockdowns, prolonged Eid holidays, and a seasonal drop in inflows of remittances after Eid.

The huge deficit has reduced the surplus value of the current account to $153 million during the period of July to May of the financial year 2020-21 as compared to a deficit of $4.3 billion reported in the previous financial year.

A.A.H Soomro, Managing Director at Khadim Ali Shah Bukhari Securities, told Propakistani,

Covid-led relief is gone now. It’s time for policy makers to triple their efforts on Exports of Goods & Services. The entire growth story is contingent on it. Given the economic rebound, I wouldn’t be surprised at $700-800m sustainable numbers also. More travel will clip remittances growth in the next few months. The work has just begun for the economic team!

The trade deficit of goods is increasing every month which stood at $24.1 billion during July-May as compared to $19.1 billion recorded in a similar period of the last year, showing a 26% or $5 billion decline.

On the other hand, the trade deficit of the services reduced to $1.5 billion during July-May from $3.04 billion of the last year’s similar period, reducing by over 50% year-on-year. Hence, the overall deficit stood at $22.7 billion, showing an increase of 15.7% in deficit values.

Remittances maintained a robust growth with inflows surged to $26.7billion during July-April, showing an increase of 26% or over $ 6billion year-on-year. The consistent strong support from overseas Pakistanis through remittances shored up the current account level to retain surplus in the ten months of the current financial year.

The huge deficit of the current account in May dashed the hopes of closing the financial year with surplus values.

State Bank of Pakistan (SBP) projected earlier that the current account deficit of the country will stay up to 1% of the GDP.

Source: Pro Pakistani