Ayesha Mudassar

The implementation of an aggressive yet selective import compression policy has significantly shrunk the country's current account deficit (CAD), said renowned economist and Dean of National University of Science and Technology (NUST) Dr. Ashfaque Hassan while talking to WealthPK. Banning the import of non-essential goods to preserve the country’s foreign exchange reserves has proved an effective step, he said.

Dr. Ashfaque claimed that for the last four years, he had been requesting the government and the departments concerned to adopt the aforementioned policy. To reduce the import bill, it was necessary to ban certain luxury and fast-moving items. As per the statistics released by the State Bank of Pakistan (SBP), the current account deficit narrowed 90.2% to $0.24 billion in January 2023 from $2.47 billion in the corresponding month last year.

Pakistan's persistent balance of payments problem worsened last year with the forex reserves falling to critical levels. As of February 10, 2023, the SBP had only $3.1bn in reserves, barely enough to cover three weeks of imports. According to the data issued by the Pakistan Bureau of Statistics, the current account deficit during the first seven months of the current fiscal year stood at $3.8bn, representing a decline of 67.1% compared to the corresponding period of the last fiscal year.

Furthermore, the imports declined to $33.5 billion in the July-January period of the current fiscal year from $42.3 billion in the same period of the previous year. Along with curtailing imports, export promotion was the need of the hour that would help curtail trade deficit, maintain a satisfactory level of foreign exchange reserves, and reduce exchange rate volatility, Dr. Ashfaque added.

Credit: Independent News Pakistan-WealthPk