The country's services trade deficit crossed $2 billion mark during first nine months of the current fiscal year followed by a hike in imports and a slowdown in exports. Analysts said that performance of services trade was gradually deteriorating mainly because of massive slowdown in exports and the rising deficit is directly burdening current account balance, which is already on the higher side.
The country has already witnessed a high current account deficit of over $3 billion in first nine months of current fiscal year.
Major decline in the exports of financial, communications and government services has resulted in a huge decline in overall exports of service sector and a rise in the deficit. According to State Bank of Pakistan, services sector's trade deficit posted an increase of 100 percent during July 2011-March 20112 in the current fiscal year. As a result of the current surge, the sector's deficit mounted to $2.131billion in first nine months of fiscal year 2011-12 (FY12) against $1.064 billion in the corresponding period last fiscal year, depicting an increase of $1.067 billion.
A detailed analysis showed that both components of services sector - exports and imports - were not performing well with exports registering a decline of 17 percent, while imports posted an increase of 6 percent during the period under review.
The services sector's exports fell to $3.691 billion in July 2011-March 2012 of FY12 against $4.436 billion in the same period of FY11, depicting a decline of $744 million.
Services sector's imports registered a growth of $323 million during the period under review. Overall services sector's imports surged to $5.823 billion during first nine months of the current fiscal year against imports of $5.5 billion in the corresponding period of FY11.
Month-on-month basis, the services sector posted a deficit of $214 million in March 2012 along with $445 million exports and $659 million imports. However, March 2012 deficit is less than March 2011, in which services sector witnessed a deficit of $291 million with $392 million exports and $683 million imports.
On exports' side, a major decline was registered in the government services account, which posted a decline of 33 percent, down to $1.03 billion in July 2011-March 2012 from $1.955 billion.
Sector-wise analysis showed that the country earned $1.1 billion on account of transportation services, $270 million from travel, $156 million from communication, $18.6 million from construction services, $183 million from Information Technology (IT) and $39 million through financial services. The country also earned an amount of $1.3 billion on account of government services during July 2011-March 2012.
On the other hand, transportation payments stood at $2.6 billion, travel $950 million, communication $131 million, construction $52 million, insurance $183 million, financial sector $83 million and IT sector payments stood at $122 million during the period under review.
In addition, some $100 million was paid on account of royalties and $618 million were paid for government services during the first half of the current fiscal year.