The country's current account deficit continued to deteriorate and with an increase of 160 percent, it crossed $ 6 billion mark during the first nine months of this fiscal year, mainly due to higher import bill. Economists said that a widening trade deficit followed by rising import bill has largely contributed in higher current account deficit during this fiscal year.
However, on positive note, they said that pressures on the overall external sector has been contained as there were sufficient financial inflows including foreign exchange reserves and FDI were available to finance the current account. The State Bank of Pakistan (SBP) Wednesday revealed that the country's current account posted a deficit of $ 6.13 billion during July-March of FY17 compared to $ 2.35 billion in the same period of last fiscal year (FY16), depicting an increase of 160.7 percent or $ 3.779 billion. Combined deficit of goods, services and income rose to $ 22.948 billion in first nine months of current fiscal year compared to $ 19.251 billion in the same period of last fiscal year.
With $ 16.107 billion exports and $ 33.889 billion imports, the country's goods trade deficit surged by 33 percent to $ 17.789 billion during July-March of FY17 against $ 13.356 billion deficit in the corresponding period of last fiscal year. During the period under review, goods import bill surged by 15 percent or $ 4 billion to reach $33.889 billion at the end of March 2017.
According to SBP, when the economy is taking off, it is natural to expect some widening in the current account deficit. Nevertheless, it needs to be contained within sustainable levels.
The SBP in its recent report on economy said the current surge in imports is mainly concentrated in the growth-inducing capital goods: the import of machinery, fuel and metal groups accounted for more than half of the total imports during this year. However, the external inflows in the country have been sufficient enough to finance the current account deficit so far and more importantly, the current level of SBP's foreign exchange reserves can comfortably finance more than five months of imports, it added. The SBP expects that in view of strong growth in imports and taking stock of developments in international commodity prices and global economic trends, the current account deficit is likely to increase. However, it observes that the country's foreign exchange reserves will remain at a comfortable level to finance the external account. The detailed analysis also revealed that deficit of income sector stood at $ 3.189 billion with $ 3.707 billion payments and $ 518 million receipts in the first nine months of this fiscal year.
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