Global Rice News

Pakistan Informs IMF of Projected Decrease in Current Account Deficit to $4.5 Billion

Pakistan has informed the International Monetary Fund (IMF) that the Current Account Deficit (CAD) is projected to decline by $2 billion, reducing it from $6.5 billion to $4.5 billion by the end of June 2024. This downward projection of the CAD reflects the expected continuation of the slowdown in imports for the remainder of the fiscal year.

To overcome the balance of payment crisis caused by difficulties in realizing the desired level of external dollar inflows, Pakistani authorities are left with no choice but to reduce the CAD. Pakistan’s external financing requirements amount to $28 billion, which includes $23.5 billion for foreign debt servicing and a projected CAD of $4.5 billion.

Although the disbursement under the $3 billion Stand-by Arrangement (SBA) program with the IMF improved in July 2023, the pace of external loans and grants has slowed down in the last two months. Pakistani authorities anticipate that the completion of the first review of the IMF program will increase the inflow of dollars from multilateral and bilateral creditors.

Dr. Hafiz A. Pasha, an independent economist, estimated the external financing gap to be around $6 to $7 billion for the current fiscal year. He believes that the IMF review will help reduce this gap.

According to top official sources, the current account deficit was $0.947 billion in the first quarter of the current fiscal year, indicating that the overall CAD is expected to be limited to $4.5 billion, down from the earlier projection of $6.5 billion for FY24. These projections have been shared with the IMF’s review mission, which is currently engaged with Pakistani authorities as part of the $3 billion SBA program.

The government aims to achieve exports of goods worth $30.843 billion, while imports are projected to reach $64.7 billion. With increased production of 2 million tonnes of rice and 5 million additional bales of cotton, the Ministry of Finance expects a positive impact on the overall trade balance through increased rice exports. However, sources suggest that the import bill may be reduced from the projected amount of $64.7 billion to $58 billion for the current fiscal year.

There is a potential risk of reduced remittances, which may fall below the official projection of $32.889 billion for the current fiscal year.

The government anticipates a GDP growth rate of around 3.5 percent, driven by improved performance in the agriculture sector and a growth rate of approximately three percent in the large-scale manufacturing sector.

The average Consumer Price Index (CPI) based inflation for the current fiscal year is expected to be around 21 percent. However, inflation is likely to decrease on a monthly basis due to reduced imports of commodities, an improved exchange rate, and better supply of goods for the remaining period of the fiscal year.

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