Ayesha Mudassar

The implementation of an aggressive yet selective import compression policy proved to be an effective step in shrinking the country’s current account deficit (CAD), economic experts say. As per the Economic Survey 2022-23, the CAD settled at $3.3 billion during July-April period of fiscal year 2022-23 against a deficit of $13.7 billion during the corresponding period of last year, demonstrating a 76.1% contraction. The current account posted a surplus of $654 million in March 2023 against a deficit of $981 million during the corresponding month of last year.

“The predominant factor behind this improvement was the 29.7% decrease in the merchandise trade deficit on the back of a substantial decline in import payments to $41.5 billion during July-March FY23 from $52.7 billion during the same period of last year,” said Dr Ashfaque Hassan, a noted economist and Dean National University of Sciences and Technology (NUST), while talking to WealthPK.

Presenting the Economic Survey 2022-23, Finance Minister Ishaq Dar said the regulatory measures have helped in curtailing imports. Those measures include imposing a 100% cash margin requirement on 702 items, tightened regulations for exchange companies, prudential regulation for consumer financing, and increased cash reserve requirement (CRR) for banks by 100 bps during July-March FY23.

Along with the decline in imports, exports also reduced by 9.8% during the first nine months of FY23, and were recorded at $21 billion compared to $23.3 billion during the same period last year.

At a recent meeting of the Senate Standing Committee on Finance, Businessmen Group (BMG) Chairman Zubair Motiwalla, and Karachi Chamber of Commerce and Industry (KCCI) President Muhammad Tariq Yusuf said that weak global demand and austerity measures (high-interest rates, and import controls) have negatively impacted export performance.

Keeping in view unfavorable global and domestic economic conditions, the government has taken administrative measures to contain aggregate demand. Resultantly, the CAD narrowed down considerably despite a decline in exports.

Credit : Independent News Pakistan-INP wealth pak