Services trade deficit shrinks by 90 percent

The country's services trade deficit fell by 90 percent to $178 million during the first eight months of the current fiscal year mainly because of the Coalition Support Fund (CSF) inflows. Economists said that after the CSF payments, services trade also improved during the current fiscal year against last fiscal year.
"At present, all segments of services trade deficit are encouraging, as overall deficit has declined, exports are witnessing an increasing trend and imports are on the decline," they said. It posted millions of dollars in surplus between August last year and January this year.
During this fiscal year, the country received $1.8 billion on account of CSF from the US: the first tranche of $1.118 billion was received in August last year followed by another payment of $688 million in December last year.
In the current economic situation, when the country is faced with the challenge of depleting foreign exchange reserves followed by debt repayment to the International Monetary Fund (IMF), a small deficit by the services trade sector was a "good indication", the economist said.
According to the data compiled by the State Bank Pakistan (SBP), the services trade deficit shrunk by 90.5 percent during July-February of fiscal year 2012-2013 (FY13).
The services sector deficit declined to $178 million in the first eight months of the current fiscal year against $1.884 billion in the same period of the past fiscal year, depicting a decrease of $1.706 million.
A detailed analysis showed that during the period under review, imports registered a slight decline, while exports continued to post a healthy growth, restricting the deficit at lower levels.
With a strong growth of 41 percent or $1.423 billion, the services sector exports surged to $4.866 billion in July-February of FY13 against $3.443 billion in the corresponding period of the past fiscal year. Service sector imports went down by 5.3 percent or $283 million to $5.044 billion in the first eight months of FY13 against imports of $5.327 billion in the same period of the past fiscal year.
On month-on-month basis, however, services sector trade posted a deficit of $254 million in February last year with exports of $331 million and imports worth $585 million. During the period under review, the transport sector contributed a major share in the overall deficit, as exports under this head stood at $824 million against $2.104 billion imports, depicting a deficit of $1.28 billion in the first eight months of FY13.
The country's service trade exports comprised $1.118 billion of CSF, $210 million in travel, $313 million in communication, $20 million in construction, $193 million in information technology, $23 million in insurance sectors, some $3 million on account of royalties and license fees and as much as $34 million on account of financial services during July-February of FY13.
During the same period, imports comprising payments of $874 million on account of travel, $110 million of communication, $4 million of construction, $70 million of insurance, $80 million on account of financial sector and some $131 million for computer and information services payments. In addition, $94 million was paid on account of royalties and $533 million were paid for government services.