Pakistan’s current account deficit – the difference between country’s expenditure and income – spiked to $572 million in April 2020 but remained largely under control and affordable on the back of recent growth in the country’s foreign currency reserves.
The current account deficit soared 64-fold in April compared to $9 million in the previous month of March, the State Bank of Pakistan (SBP) reported.
The reason for comparing the numbers month-on-month rather than on a year-on-year basis “is to check the impact of coronavirus pandemic on the economy”, BMA Capital Executive Director Saad Hashmi said while talking to The Express Tribune.
“The impact of Covid-19 will determine the direction of the national economy, particularly in relation to exports and workers’ remittances, going forward,” he said.
Cause of spike
Arif Habib Limited (AHL) Director Ahsan Mehanti said a significant drop in exports mainly caused the widening of the current account deficit in April. Exports of goods dropped one-fourth to $1.39 billion in April compared to $1.82 billion in March, according to the central bank.
Besides, a 5% slowdown in remittances also contributed to the widening of the external deficit. However, a nominal decrease in imports helped contain the deficit, Mehanti said.