The endemic current account deficit

Pakistan’s economic growth has been persistently hampered by its current account deficit (CAD), a situation where the country’s imports exceed its exports, resulting in a shortage of foreign currency. This deficit has been escalating over several decades, posing significant challenges to Pakistan’s economic stability. The CAD issue is exacerbated by Pakistan’s dependence on international financial institutions and foreign markets to finance its deficits, as the country lacks substantial sovereign resources. These CAD episodes become more frequent and severe as time progresses, raising concerns about the nation’s economic future. The Current Account (CA) is a crucial component of a country’s Balance of Payments (BoP) account, recording transactions related to goods and services, primary income, and secondary income in international interactions. Pakistan’s CA has not aligned with its trading partners’ accounts, creating a structural imbalance. When imports exceed exports, a CAD emerges, necessitating external borrowing to cover the deficit.