According to information shared by State Bank of Pakistan (SBP) on Tuesday, current account deficit in Pakistan increased by 91% during the past five months compared to the similar timeframe last year (YoY). Current account deficit occurs when the country spends more money on imports than it makes from exports- with a higher figure signaling fiscal problems.
It is worth noting that the current account deficit surged 120% to $839 million in November compared to previous month. The trend could be alarming considering the increase in imports and drop in exports in the current fiscal year, and reflects a trade gap with other nations.
Pakistan has experience a shortage of foreign exchange inflows from the traditional sources, such as remittances. In addition, we recently reported that Foreign Direct Investment (FDI) dropped by 45%, whereas remittances also decreased in the last year. According to SBP during the last five months FDI could not touch even half a billion dollars and remained at $460 million.
Moreover, several reports indicate that Pakistan under intense pressure because of a fall in exports despite introducing a number of incentives, including government measures to lower the rupee exchange rate. It is pertinent to mention that foreign reserves of the country currently stand at $23 billion.
Despite the federal government announcing on a daily basis that the country has been achieving higher economic growth and the country is on a path to economic progress and prosperity, sadly all major indicators are pointing in the opposite direction.