Fiscal Year 2015 services trade deficit narrows down

The country's services trade deficit narrowed down by a modest 5 percent to $2.5 billion during the last fiscal year (FY15) supported by higher Coalition Support Fund (CSF) inflows. "Declining trend in services trade deficit is a positive sign for the country's economy particularly for external account and decline in services trade deficit also helped curtail the CA deficit, which decreased by 27 percent to $2.28 billion in the last fiscal year," analysts said.
Growth in services exports supported by higher CSF inflows has largely contributed to post a lower deficit, they added. It is also important to recall that during FY14 inflows under the CSF were delayed, which added to the pressures on the forex reserves. However, in FY15, sufficient CSF inflows have been arrived, of which services sector performance appeared glowing. Pakistan has received an amount of $1.452 billion in FY15 from the US on account of CSF compared to $1 billion in FY14, they said.
They said that still a huge CSF amount is pending with the US and Pakistan is expected to receive another amount of $1.6 billion during this fiscal year (FY16). A tranche of $336 million on account of CSF has arrived this week, they said. "It is being expected that service sector deficit may further reduce in coming months, if pending inflows matured timely," they added. According to State Bank of Pakistan (SBP), the country's services sector trade posted a deficit of $2.517 billion in FY15 compared to $2.65 billion in the same period of last fiscal year, depicting a slight decline of 5 percent or $133 million.
A detailed analysis revealed that during the period under review, services sector exports continued to surge and registered a 7 percent or $396 million growth as Pakistan's services sector exports reached $5.741 billion in FY15 relative to $5.345 billion in FY14. Similarly, with an increase of 3 percent, services sector imports surged to $8.258 billion in the last fiscal year compared to $7.9 billion in previous year. Month-on-month basis, during June 2015, services trade deficit stood at $480 million with $872 million imports and $392 million exports.
The country earned an amount of $2.375 billion on account of government services of which some $1.452 billion were arrived via CSF. Similarly, some $1.18 billion were earned from transportation services, $306 million from travel, $830 million from telecommunication, $45 million from construction services, $74 million through financial services, $68 million from insurance sector in FY15. Meanwhile, transportation payments (imports) stood at $3.7 billion, travel $1.36 billion, telecommunication $401 million, financial sector $226 million, insurance $261 million, $583 million as government services and some $159 million were paid as charges for intellectual propriety. The performance of services sector during FY14 was not impressive as exports posted a massive decline.