Pakistan's current account gap widens to historic high of $2.6bn

Pakistan’s current account deficit — the gap between the country’s higher foreign expenditure and low income — widened to a 13-year high of $2.6 billion in January 2022 in the wake of a surge in import payments due to rising commodity prices in the international market.

This was the highest-ever monthly current account deficit. The last time the figure was this high was back in October 2008 when it was $2.03bn.

According to the State Bank of Pakistan, the current account deficit of the country has risen to $2.6 billion in January 2022 from $1.9 billion in December 2021.

Taking to its official Twitter account, the bank account noted that the change has taken place largely due to imports in kind that are fully financed.

“Excluding these, the deficit would have been around $1 billion lower in January 2022,” the SBP wrote.

Pakistan-Kuwait Investment Company Head of Research Samiullah Tariq said the deficit number was higher than expectations, "due to higher than expected imports."

Meanwhile, Arif Habib Limited Head of Research Tahir Abbas said that the current account recorded a 37% increase on a month-on-month basis.

"This is the highest-ever deficit in the history of Pakistan," he said.

Shedding light on the reason behind a massive increase, the analyst said that the current account deficit widened due to a higher-than-expected trade deficit of $3.9 billion during the month under review.