ISLAMABAD    -   Pakistan’s current account deficit has recorded decline of around 55 percent in first couple of months (July and August) of the current fiscal year mainly due to contraction in trade deficit of the country.

The country’s current account deficit was recorded at $1.292 billion in July-August period of the year 2019-2020 as against $2.85 billion in the corresponding period of previous year, according to the latest data of State Bank of Pakistan (SBP).

The deficit has narrowed by $1.558 billion in the first two months of ongoing financial year as compared to the same period of last year.

The improvement in Pakistan’s external account has gained further momentum as current account deficit posted a decline of 55 percent during the first month of this fiscal year.

The country’s external account was under pressure for the last two years due to higher current account deficit followed by massive import payments.

The government was forced to take massive borrowing to meet the current account deficit.

However, the federal government has taken steps to control the deficit by imposing duties on the imports.

The country’s trade deficit shrank by nearly 40 percent in the first two months of current fiscal year, driven largely by a decline in imports of non-essential luxury items.

Improvement in trade deficit coupled with slight growth in workers’ remittances resulted in massive reduction in the current account deficit during the first month of this fiscal year.

The country’s imports are continuously declining mainly due to imposition of duties and massive decline in machinery imports, following the conclusion of early phase of CPEC projects and slow economic activity.

According to SBP, cumulative deficit of trade, services and income stood at $ 4.604 billion in first two months of FY20 as against $6.782 billion in the same period of last fiscal year.

The detailed analysis revealed that contractions in import bill of goods and services were the primary factors of massive decline in current account deficit.

With $7.704 billion imports and some $4.142 billion exports, the country’s overall goods deficit was declined by 40 percent to $3.562 billion in July-August period of the year 2019-20. The economists said that the lower current account deficit will also help to reduce the pressure on the depleting foreign exchange reserves of the country.

The total liquid foreign reserves held by the country stood at US$15,898.1 million on 13 September. “During the week ending 13 September 2019, SBP’s reserves increased by US$138million to US$8,600.4 million,” according to the SBP.