July-January services deficit soars to $1.6 billion

The country's services trade deficit widened to $1.6 billion, up by 670 percent, during the first seven months of current fiscal year, mainly due to slowdown in exports, analysts said. They said a massive increase in services deficit is a matter of concern for the policymakers and they should develop a long-term policy to curtail the higher deficit of services trade.
"The rising services sector deficit will directly hurt the CA balance, already posting a higher deficit and consuming millions of dollars of the forex reserves," they added. They said during the last fiscal year, the country's service trade had presented an improved picture supported by inflows of much awaited Coalition Support Fund (CSF). However, this year service sector performance is very dull due to slow arrival of much awaited CSF inflows.
During the last fiscal year the country had received some $1.8 billion on account of CSF, they said and added that although, some CSF inflows have already arrived during this fiscal year, however these are much lower than previous year. The State Bank of Pakistan revealed that services sector trade statistics continue to deteriorate and the services trade deficit surged to $1.687 billion in July-January of FY14 against $219 million in the corresponding period last year, depicting an increase of $1.468 billion.
A detailed analysis revealed that exports and imports continue to decline during this fiscal year. During the period under review exports of services sector registered a decline of 41 percent. The services sector exports fell to $2.706 billion in first seven months of this fiscal year compared to $4.616 billion in the same period of last fiscal year, showing a decline of 1.910 billion.
On the other hand services sector imports plunged by 9 percent or $442 million to $4.393 billion during July-January of FY14 against imports of $4.835 billion in the same period of FY13. Month on month basis, services deficit in January 2014 stood at $292 million with $331 million exports and $622 million imports. Economists said high payments on account of government service, transportation, travel and information technology are responsible for rising services trade deficit. "We can reduce services trade deficit by better IT and travel services," they added.