Ayesha Mudassar

The country’s balance of payments position continues to be under stress despite a prominent contraction in the current account deficit.The weakened position is mainly due to adverse global shocks and domestic uncertainties, said Finance Minister Ishaq Dar while presenting the Economic Survey for the fiscal year 2022-23.As per the Economic Survey, the import compression measures drove a 76.1% contraction in the current account deficit during July-April FY23. The deficit reached just $3.3 billion against a deficit of $13.7 billion in the same period last year. However, exports also declined by 11.7% and imports reduced by 28.4% during the 10-month period of FY23.

Worker’s remittances registered a decrease of 13% and stood at $22.7 billion as against $26.1 billion over the same period last year, owing to higher inflation in the host countries and greater use of informal non-banking channels. Reduced remittance inflows and elevated interest payments on external debt increased the income account deficit by 0.82% during the July-April period.

Due to the delay in the completion of the ninth review of the IMF Extended Fund Facility and associated external financing, the financial account registered a colossal deficit. The account recorded net outflows amounting to $1.9 billion during July-April FY23 against an inflow of $8.1 billion over the corresponding period of last year. Uncertain taxation policies and restrictions on the outbound repatriation of profits have reduced foreign direct investment (FDI). Net FDI inflows were recorded at $1.2 billion during the July-April period as against $1.5 billion FDI over the same months of last year.

The country’s foreign exchange reserves witnessed a decline mainly on the account of amortisation of official loans and liabilities during the 10-month period of FY23 and reached a level of $4.5 billion by the end of April 2023. Due to the pressure on foreign exchange markets, the rupee depreciated 27.8% against the US dollar during this period. The rupee was valued at Rs204.5 in July 2022 against 289.5 by the end of April 2023.

Credit: Independent News Pakistan-WealthPk