The current account deficit, which is one of Pakistan’s biggest economic challenges, has contracted by 2.6 per cent YoY to $3.7 billion, according to the State Bank of Pakistan’s (SBP) current account data for the first quarter of Financial Year 2018-19 (1QFY19). The lower deficit was primarily due to 13.1 per cent yearly increase in remittances.

During the quarter, the country’s imports were recorded at $13.8 billion, depicting an increase of 6 per cent. The growth in imports can be attributed to higher petroleum imports, as in the period Jul-Aug 2018, Pakistan imported $3.2 billion worth of petroleum products, up by a massive 52 per cent YoY.

Similarly, in 1QFY19, exports rose by 3.6 per cent YoY to $5.9 billion which was due to higher textile and food exports.

Despite the worsening trade deficit, which rose by 7.6 per cent YoY to $7.9 billion, the current account deficit reduced by $96 million YoY due to 26.5 per cent reduction in services deficit as well as 13.1 per cent YoY increase in remittances. Remittances rose to $5.4 billion supported by strong inflows from USA, Malaysia, UK and UAE.

On a sequential basis, the current account deficit has fallen by a massive 42 per cent while the trade deficit and services deficit declined 10 per cent and 46 per cent respectively.