July-April C/A deficit rises to $3.39bn

RECORDER REPORT

KARACHI: The country’s current account deficit continues to deteriorate reaching $3.3 billion during the first 10 months of current fiscal year (2011-12), primarily driven by high deficit of trade and services sectors, besides slow foreign inflows.

The State Bank of Pakistan on Thursday revealed that current account balance, which was surplus during the last fiscal year, is now facing massive deficit followed by high goods and services deficit. The country’s current account balance has posted a deficit of $3.394 billion during July-April of FY12 compared to a surplus of $466 million in the corresponding period of FY11.

Economists said that deterioration in current account balance is not good for the economy as every month the government is spending millions of dollars to finance this item. In the past high current account deficit forced Pakistan to rejoin International Monetary Fund (IMF), they added. It is urgently need to take some steps to curtail this upward trend otherwise the country’s depleting foreign exchange reserves will further reduce, they said.

The State Bank statistics showed that cumulative deficit of goods, service and income rose by 46 percent during the period under review. With current upsurge, total deficit of goods, services and income surged to $17.685 billion in first 10 months of current fiscal year against a deficit of $12.189 billion in the same period of last fiscal year.

Major growth has been witnessed in goods deficit, which posted an increase of 50 percent during the period.

The country’s overall goods imports stood at $33.157 billion and exports at $20.474 billion with a trade deficit of $12.683 billion during July-Feb of FY12. Previously, the deficit stood at $8.499 billion in corresponding period of FY11, depicting an increase of $4.184 billion.

With an increase of 92 percent or $1.122 billion, the services sector deficit reached $2.347 billion in July-April of FY13 compared to $1.225 billion in the corresponding period of last fiscal year. During the period, services exports stood at $4 billion and imports at $6.448 billion.

Similarly, with $3.32 billion payments and $668 million income, income sector deficit mounted to $2.655 billion during July-April of current fiscal year.

After a gap of six years, the country’s current account balance became positive and surplus by $542 million in FY11 compared with $3.94 billion deficit in FY10 primarily driven by all-time high inflows of home remittances and exports.

However, since the beginning of current fiscal year, current account deficit is growing rapidly followed by high trade deficit and slow foreign inflows. Current transfers are also on the decline due to falling foreign inflows because of stoppage of SBA tranches by the IMF and Coalition Support Fund payment by the US.

Month on month basis, current account balance posted a deficit of $313 million along with $1.37 billion current account transfers.