- The government expects imports to decline in the remaining period of FY24.
- The Finance Ministry expects an improvement in the overall trade balance.
- Pakistan’s external financing requirements are $28 billion.
ISLAMABAD: Without moving away from the envisaged macroeconomic framework, Pakistan has informed the International Monetary Fund (IMF) that it expects the current account deficit (CAD) to decline by $2 billion to end at $4.5 billion, as against the so far estimated is $6.5 billion. Reported end of June 2024 news on Tuesday.
The downward projection of CAD indicated that the government expected imports to continue to decline in the remaining period of the current fiscal year.
Amid difficulties in bringing the inflow of foreign dollars to the desired level, Pakistani authorities have no other option but to reduce the CAD to avert a balance of payments crisis.
Pakistan’s external financing requirements were $28 billion – external debt service of $23.5 billion and CAD projection of $4.5 billion.
The signing of the IMF agreement on the $3 billion Stand-By Arrangement (SBA) program saw an improvement in foreign exchange reserves through July 2023, but the pace of foreign loans and grants has slowed in the last two months. Now officials hope that the completion of the first review of the IMF program will increase dollar inflows from multilateral and bilateral lenders.
Economist Dr Hafiz A Pasha estimates that the external financing gap for the current fiscal year could be around $6 to 7 billion and the completion of the IMF review will help Islamabad reduce this gap.
“Current account deficit in the first quarter of the current fiscal year stood at $0.947 billion, so the overall CAD is expected to remain limited to $4.5 billion for FY24 against the earlier estimate of $6.5 billion,” sources said. news on Monday.
These estimates have been shared with the visiting IMF review mission which is engaged with Pakistani authorities under the $3 billion SBA programme.
The government estimates that exports in the current financial year will be around $30.843 billion while imports will be $64.7 billion.
The Finance Ministry’s estimate of seeing an improvement in the overall trade balance is based on expectations of an increase in rice exports in the wake of an increase in production of 2 million tonnes of rice and 5 million additional cotton bales. However, sources said the import bill for the current fiscal year could decline to $58 billion from an estimated $64.7 billion.
Another risk is that remittances may also fall short of the envisaged target as it could fall short by $30 billion against the official estimate of $32.889 billion for the current fiscal year.
The government expects GDP growth to be around 3.5% following the better performance of the agriculture sector and growth of the large-scale manufacturing sector at around 3%.
Consumer Price Index (CPI) based inflation is expected to average around 21% in the current financial year. Reduction in imports of goods, improvement in exchange rate and better supply of goods will help in reducing inflation on monthly basis in the remaining period of the current financial year.