State Bank of Pakistan released the current account data for Pakistan today. Current account deficit soared to $572mn in Apr’20. On yearly basis, current account deficit declined by 51% from $1165mn in Apr’19 to $572mn in Apr’20.

For the 10MFY20, current account deficit narrowed by 71% Y/Y from $11,449mn in 10MFY19 to $3,343mn in 10MFY20. As a % of GDP, CAD has declined from 4.8% in 10MFY19 to just 1.4% in 10MFY19.

Current account worsened mainly due to 17.7% M/M increase in trade deficit in Apr’20. Exports for the month of April’20 plunged by 23% M/M on accounts of global lockdown and hold on orders from export destinations.

The risks to the Current Account may increase despite the plunge in the oil prices owing to a) delayed resumption of export markets b) decreasing trends in remittances from oil-rich nations and c) pent up demand for imports after easing in lockdown and d) rising aggregate demand after a 525 bps cut in less than two months.

However, in the immediate future, we assign higher probability to monetary easing instead of tightening as government fires all the weapons to rejuvenate economy to ensure Fiscal Balance is maintained.