CAD narrows by 47pc in July-October.

KARACHI -- The current account deficit (CAD) fell by 68 per cent to $567 million in October compared to $1,779m in the same month last year on account of steep decline in the imports.

However, the CAD increased by 56pc when compared with $363m in September.

The data issued by the State Bank of Pakistan on Monday showed that the CAD declined by 46.8pc in July-October FY23 compared to $2.821 billion against $5.305bn in the corresponding period last year.

The imports of goods and services fell to $23.688bn in 4MFY23 against $26.808bn in 4MFY22. However, exports of goods and services rose slightly to $9.825bn compared to $9.576bn in the same period last year.

According to SBP data, the trade deficit also narrowed by almost 23pc to $11.604bn in the first four months of 2022-23 against $15.059bn in the corresponding period last year.

The sharp contraction in CAD seems to have eased pressure on the government which has been struggling to build the country's exchange reserves not enough to cover eight weeks' imports. However, the situation regarding the inflows from friendly countries looks static, particularly after a delay in talks with the IMF.

The SBP's foreign exchange reserves stood at $8bn and will further decline with the payment of $1bn against the maturity of Sukuk (Islamic bonds) on Dec 5.

There is still a serious problem to meet the country's external financing obligations, but the finance minister has recently rejected all perceptions about growing default risks and difficulties around the economy and claimed enough funds have been arranged to bridge the external account gap.

However, there is no clear response from China as Pakistan is willing to roll over $13bn Chinese loans for more than a year...