ISLAMABAD — Federal Finance and Revenue Minister Miftah Ismail said on Friday he expects the country’s economic situation to turn around very quickly.
“The current account deficit for April was $623 million, less than half the average for the first 9 months of the fiscal year. This is a very good sign for external stability. With positive discussions with the IMF underway, we expect a turnaround in the economic picture very soon,” the minister said on Twitter.
The current account deficit has been declining for two months. “The current account deficit narrowed to $623 million in April 2022; only two-thirds of the March 2022 deficit of $1,015 million,” the State Bank of Pakistan said. “An increase in workers’ remittances (by $315 million) and a decline in imports (by $246 million) explain this reduction,” he added. Meanwhile, the cumulative current account deficit has increased 27-fold to $13.78 billion in the first 10 months (July-April) of the current fiscal year, from just $543 million in the same period last year.
The current account deficit, the difference between the inflow and outflow of US dollars, is one of the main economic challenges for the current government. The current account (CAD) deficit and the repayment of previous borrowings are eroding the country’s foreign exchange reserves, which have fallen to $10.164 billion.
The coalition government is negotiating with the IMF to relaunch the loan program to deal with its balance of payments crisis. Talks between the two sides had started on May 18 in Doha, Qatar, during which Pakistan assured the Fund to reduce the volume of subsidies on the prices of electricity and petroleum products.
Pakistan is not raising oil and electricity prices from March 2022 despite a massive rise in the international market. Previous and incumbent governments provide massive subsidies on oil prices, which would widen the country’s budget deficit in the current fiscal year.
Earlier in March this year, talks between the IMF and Pakistan remained inconclusive as the Fund opposed the Prime Minister’s bailout package for cutting petrol, diesel and oil prices. electricity, as well as for granting a tax amnesty to the industrial sector.
In a bid to control the spiraling current account deficit, the government on Thursday announced an import ban on 38 non-essential luxury items, which would save $6 billion a year in foreign exchange reserves.
Items included cell phones, household appliances, fruits and dried fruits (except from Afghanistan), tableware, private weapons and ammunition, shoes, chandeliers and lighting (except screensavers energy), headphones and speakers, sauces, ketchup, etc., doors and window frames, travel bags and suitcases, sanitary ware, fish and frozen fish, carpets (except from Afghanistan ), canned fruits, tissue paper, furniture, shampoos, automobiles and others.