The current account deficit (CAD) shrank to USD 276 million in November as against USD 569 million in October.
Talking about the industrial sector, the MoF also conceded downward trends. Industrial activity, measured by the large-scale manufacturing (LSM) index output, came in somewhat lower than expected in October as the sector was the most exposed to external conditions, the newspaper reported.
The situation on the LSM front has been attributed to several factors. Firstly, the weighted average cyclical output gap in Pakistan’s main trading partners remains in negative territory and continues to widen gradually, which implies a reduction of global demand.
Secondly, the impact of floods-induced destruction of agricultural output may start finding its way into the industrial sectors. Thirdly, Pakistan’s official foreign exchange reserves are at relatively low levels, necessitating restrictive monetary policy and other measures to limit imports.
The MoF expected the pressure on LSM likely to be sustained in November if the negative shocks are continuing to prevail and outpace the LSM output which may gain some momentum as sugarcane crushing starts in November.
The balance of payments data indicates that exports of goods and services increased by around 1.9 per cent in November as compared to October. Exports have now settled around USD 2.9 billion and are expected to climb further to USD 3 billion in the coming months. However, on a year-on-year basis, exports decreased by 12.7 per cent.
November’s balance of payments data further witnessed that the import of goods and services fell by 5.9 per cent month-on-month and a massive decline of 32 per cent year-on-year.
Contained domestic demand and higher domestic interest rates reflect low imports for machinery, transport, textile, agri and other chemicals and metal groups. It is expected that imports will settle at further lower levels gradually in the coming months.