The current account deficit dropped from an astounding $3.63 billion during the same period last year to just $831 million during the first half of this fiscal year (July–Dec 2023). Additionally, the State Bank of Pakistan (SBP) reports that net foreign direct investment (FDI) increased by 35% from July to December 2023 to $862.6 million from $640 million.
When foreign investment in the energy sector begins to flow in from Saudi Arabia, the United Arab Emirates, and Qatar at any point this year, one can anticipate a significant increase in FDI. Co-managed by the military and civil leadership, the Special Investment Facilitation Council is currently completing a number of significant foreign direct investment (FDI) agreements in the mining, agriculture, and oil and gas industries.
However, the revised estimates from the International Monetary Fund (IMF) indicate that the current account deficit for this fiscal year could reach the $5.7 billion mark, despite the extraordinary decline in imports, both natural and caused by policy, that occurred from July to December 2023.
This indicates that the trend observed from July to December 2023 will be reversed, with the current account deficit expected to increase from January to June of this year. That would undoubtedly have an impact on the rupee’s condition, and the local currency might depreciate once more, bucking the trend that began in September of last year.
In a challenging economic climate, a weak elected government might not be able to encourage economic growth.
Earnings from exports determine a lot. According to the State Bank of Pakistan, exports of goods brought in $15.3 billion (free-on-board value) and exports of services brought in $3.8 billion, for a total of $19.1 billion in exports during the first half of the current fiscal year. A $11.4 billion trade deficit resulted from currency spending on imports and goods and services totaling ($25.2 billion plus $5.2 billion) $30.4 billion. It will not be simple to fill.
However, because we also export human capital and receive large amounts of foreign exchange through remittances, the hard-earned money of Pakistanis living abroad will continue to fill this gap. Remittances of $13.4 billion, albeit less than the $14.4 billion received from July to December 2022, enabled Pakistan to close the entire trade deficit.
