F.P. Report
ISLAMABAD: As the country has surprisingly reported a lowering current account deficit (CAD), the Pakistan Industrial and Traders Associations Front (PIAF) has warned the authorities that the balance of accounts should not be at the cost of industrial growth, which is constantly declining.
PIAF Chairman Faheemur Rehman Saigol, in a statement, observed the reduction in CAD was due to lower imports, as there were no significant increases in exports or inflows. However, the government still struggles to meet the decreasing CAD due to low foreign exchange reserves, as Pakistan’s current account posted a deficit of $74 million in previous month of 2023 while on a yearly basis, it was significantly lower, i.e. over 91%, than the $849 million recorded in the same month last year. During the first eight months of FY23, Pakistan’s current account deficit decreased by 68% to $3.8 billion from $12 billion in the same period last year.
As per the central bank data, the country’s exports increased to $3.418 billion in Oct 2023 against $2.902 billion in Oct 2022, reflecting a jump of 18%. On the other hand, total imports lowered by 3% to $5.17 billion in October 2023 against $5.35 billion in the same period last year. According to the SBP, Pakistan posted a current account deficit of $1.06 billion in July-October of FY24 as compared to a deficit of $3.1 billion during the same month of last fiscal year (FY23), depicting a massive decline of over $2 billion. The central bank in its last Monetary Policy Committee meeting noted a substantial improvement in the current account balance, as the deficit narrowed over 58% YoY to $947 million in Jul-Sep FY24, while almost leveling out in Sept 2023.
The current account is a key figure for cash-strapped Pakistan that relies heavily on imports to run its economy. A widening deficit puts pressure on the exchange rate and drains official foreign exchange reserves that stood at a little over $7.6 billion, according to the latest data.
PIAF Chairman Faheemur Rehman Saigol stated that the government’s strict policies along with high cost of doing business owing to multiple increases in fuel cost and energy tariffs have almost halted the industrial production.
He complained that the significant drop in imports through administrative controls in the past to manage the low foreign exchange reserves had badly impacted economic activities, he pointed out. The move led to massive unemployment as companies were unable to import the raw material necessary to keep their manufacturing wheel running.
While expressing deep concern over the severe gas crisis, he stated that the emerging situation has terribly affected industrial activities as well as exports, which would have a devastating impact on the already ailing economy and the lives of millions of poor people due to massive layoffs.
How long an industrialist can bear the burden of paying salaries and wages to most of the idle employees if he is unable to produce at full capacity due to the unavailability of raw material amid persistent gas shortage. He said that the reserves have depleted to a four-year low of $6.7 billion, raising the specter of default on international payments and foreign debt repayments. He said that the current account deficit declined and the primary reason was a 32% decline in imports compared to the same month of last year.
However, exports and remittances decreased by 13% and 14% respectively. He said that surprisingly the cumulative export earnings and workers’ remittances (at $4.35 billion) surpassed total imports ($4.26 billion), which suggests the balance of payments has significantly improved in recent months. It is unfortunate that exports are falling due to the global recession while remittances are declining because the businesses have to live with.
