Current account deficit widens to $1.66b in October

• Country witnesses largest rise in deficit for since the start of ongoing fiscal year 2021-22.
• Pakistan witnesses a steep climb in the current account deficit for the third consecutive month.
• SBP says high energy prices kept the import bill elevated despite a downtick in non-energy imports.

KARACHI: The current account deficit — the difference between the country’s higher foreign expenditures and sluggish income — widened to $1.66 billion in October 2021 mainly due to high energy prices.

According to the State Bank of Pakistan (SBP), the country had recorded a current account surplus of $448 million in the corresponding quarter of the previous year.

The $1.66 billion figure is the largest deficit recorded since the start of the current fiscal year 2021-22.

The country witnessed a steep climb in the current account deficit for the third consecutive month, remaining around $1.5 billion.

“Current account deficit widened to $1.66 billion in October 2021 from $1.13 billion in September 2021 on the back of a moderate decline in exports [and] remittances [and] some uptick in services imports,” the SBP said on its official Twitter handle.

Shedding light on the reason, it said that high energy prices kept the import bill elevated despite a downtick in non-energy imports.

According to Arif Habib Limited, on a year-on-year basis, the primary reason behind the deficit was a 66% yearly increase in total imports which clocked in at $6.8 billion.

The central bank released the data a few minutes before the announcement of the monetary policy — which was increased by 150 basis points to 8.75%.

“Rising global commodity prices and buoyant domestic demand have led to higher than expected current account deficits in the last two months,” the central bank said in its post-MPC analyst briefing,

However, it is pertinent to mention that the skyrocketing prices of commodities in the world market also contributed to the high import payments.

The cumulative current account deficit for the first four months (July and October) of the current fiscal year 2021-22 was recorded at $5.1 billion compared to a surplus of $1.3 million in the same period of last year.