State Bank of Pakistan reports on Pakistan’s current account deficit touching $18 billion in the fiscal year 2018, which is 42.5 percent more than the previous fiscal year. The deficit for year 2017-2018 has hit an all time high compared to the past two years.
SBP reports that the foreign exchange reserves decreased by $416 million during the week ending on July ’13. The total foreign exchange reserves amount to $15.682 bn including those held by SBP at $9.063 bn and $6.613bn by commercial banks.
Data released by SBP showed total imports for fiscal year ‘18 at $66.2bn as compared to $58.6bn in last year. They have increased by 13 percent. Export of goods and services have increased by 8.3 percent from last year’s $27.6 bn to this year’s $29.9 bn. Export of services dropped to $5 bn while export for goods increased by $2.7bn.
The increasing trade gap is the main cause of the increasing current account deficit as the growth in exports is less than the increase in imports. The $18 bn deficit means the economy is hitting $1.5bn on average every month.
The situation has been out of control since the last July when it first experienced an abrupt devaluation. Since then, efforts by finance ministry have experimented with regulations to control the falling exports and growing imports. The government has even levied duties on various importable items whereas, SBP has listed 132 items for 100 cash margin.
The local currency was also depreciated up to 19 percent to make imports costlier and exports cheaper in a bid to increase exports and discourage imports. The result will show in fiscal year 19 but for now, an increase in the inflation rate is expected for which the SBP has increased the interest rate to 7.5 percent.