ISLAMABAD: Pakistan’s Current Account Deficit (CAD) witnessed an unprecedented 86% contraction during the Fiscal Year 2022-23, unveiling the severe consequences of a multitude of factors on the country’s economic landscape.
The State Bank of Pakistan’s recently released Governor’s Annual Report sheds light on the significant decline, attributing it to a sharp policy-induced decrease in imports, offsetting the decline in workers’ remittances and exports.
A notable revelation is a 13.6% drop in workers’ remittances, marking the first decrease in six years. This decline was broad-based across major remittance corridors, except the US.
The report points to slowing economic activities and increased living costs globally, coupled with a moderation in crude oil prices in the latter half of FY23, impacting oil-exporting nations and subsequently leading to a reduction in remittances.
Dr. Javed, an economist at the SBP, said, “The decline in remittances is a significant concern, reflecting the broader global economic challenges. It not only mirrors the impact of economic slowdowns but also underscores the vulnerability of countries dependent on foreign labor for remittance inflows.”
He said, “Export growth faced a similar downturn, with Pakistan experiencing a 14% decline in exports during FY23. This decline became pronounced from Q2-FY23, post the devastating floods that damaged export-oriented crops such as cotton, rice, and fruits.”
The contraction in exports was pervasive across textile and non-textile categories, attributable to lower export prices and volumes. Textile exports experienced a nearly 15% fall despite a noteworthy increase in the export volume of apparel.
“Pakistan’s export decline, particularly in the textile sector, mirrors the impact of both domestic and external shocks. Diversification of export markets and product portfolios may be crucial to enhance resilience against future uncertainties,” said Dr. Javed.
The fall in the exports of rice and fruits contributed significantly to the total US$1.2 billion decline in the non-textile category. Even with higher prices, non-Basmati rice exports, a significant portion of Pakistan’s overall rice exports, decreased by nearly 18% during FY23. –INP
