Pakistan headed to record deficit in excess of $20 billion in current fiscal

With the current account deficit (CAD) touching an all-time high of $2.56 billion in the month of January 2022, Pakistan's overall CAD is expected to cross $20 billion by the end of this fiscal (2021-22), according to experts.

Pakistan's former finance minister and economist Hafeez A Pasha said that the CAD was heading towards an all-time high mark of $20 billion or 6 per cent of Gross Domestic Product (GDP) for the current fiscal year, The News International reported.

Citing the skyrocketing trends in international prices, he pointed out that Pakistan's CAD had already touched the $11.6 billion mark in the first seven months of the current fiscal year.

"For God's sake, the political parties must shun their differences because the country is heading towards a serious financial crisis," the report quoted Pasha as saying. He further added that the foreign currency reserves of the country could go below the $7 billion mark as the country had witnessed in 2017-18 when the CAD had touched the $19 billion mark.

At the same time, the International Monetary Fund (IMF) projected that the country's external debt servicing requirement would be touching $18.5 billion for the current fiscal year against $11.9 billion in the last fiscal year.

Khaqan Najeeb, former Director-General Economic Reform Unit (ERU) at the Ministry of Finance, emphasized that CAD remains a key cause of macro instability for a country like Pakistan with scarce foreign exchange.

A major reason for the rising CAD has been the declining remittances from the Pakistani diaspora, particularly in the gulf.

Remittances declined by $376 million or 15 per cent over the previous month in January 2022. In addition, exports too declined by 17 per cent over the previous month in January 2022. On the other side, strong import growth of 45 per cent over the previous year in January 2022, ensured that CAD reached an all-time high, the report noted.

The import bill of Pakistan is likely to rise further with oil prices crossing $100 per barrel and a likely rise in wheat prices amidst the ongoing Russia-Ukraine crisis.

Meanwhile, Prime Minister Imran Khan is likely to address his nation on Monday over the ongoing economic crisis. He is widely expected to announce relief plans to aid the ailing economy.

( With inputs from ANI )