Current account: Deficit widens to $1.58b in first half, SBP data shows

Figures for December reveal marked improvement.


Kazim Alam January 21, 2014
The SBP forecasts that the country will have a current account deficit of $4 billion – or 1.8% of gross domestic product (GDP). PHOTO: FILE

KARACHI:


Pakistan’s current account deficit widened to $1.58 billion in the first six months of fiscal 2014 as opposed to a deficit of $83 million in the corresponding period of fiscal 2013, according to data released by the State Bank of Pakistan (SBP) on Tuesday.


However, December witnessed a current account surplus of $285 million. This was in contrast to a deficit of $572 million in November.

Speaking to The Express Tribune, Standard Chartered Bank Senior Economist Sayem Ali said the current account surplus in December is a positive development for the foreign exchange markets. He added that the improvement has helped bring stability to the rupee-dollar exchange rate in recent weeks.

“Tighter monetary policy and sharp depreciation of the rupee has led to a current account surplus (in December),” Ali noted, adding the current account surplus was primarily led by higher exports and remittances from overseas workers last months.

 photo 285m_zps217f65e6.jpg

Pakistan exported goods worth $2.3 billion in December as opposed to exports totalling $1.8 billion in the preceding month, reflecting a month-on-month increase of 27.8%. For the July-December period, however, exports increased to $12.5 billion, up 3.2% compared to the corresponding six-month period in fiscal 2013.

Similarly, workers’ remittances increased to $1.3 billion in December from $1.1 billion in November, which shows a monthly rise of 22.6%. Workers’ remittances in July-December increased to $7.8 billion, registering an increase of 9.4% over the corresponding six-month period in the preceding fiscal year.

“Lower interest payments also supported a lower current account deficit (in July-December),” he observed.

The current account deficit in the last quarter (October-December) was $383 million as opposed to a deficit of $522 million in the corresponding three-months of fiscal 2013.

Ali also expressed concerns over the Balance of Payment (BoP) outlook due to weak foreign exchange reserves held by the SBP, which stood at $3.4 billion on January 10. The reserves cover only one month of exports. They have decreased over 37% since the beginning of the current fiscal year due to loan repayments.

The SBP forecasts that the country will have a current account deficit of $4 billion – or 1.8% of gross domestic product (GDP) − in the current fiscal year as opposed to $2.5 billion (1% of GDP) recorded in the preceding fiscal year. “This indicates that the rupee will remain under pressure in 2014 on a wider current account deficit and weak foreign investment inflows,” Ali said.

Published in The Express Tribune, January 22nd, 2014.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.

COMMENTS (1)

Kamil | 10 years ago | Reply

FBR is corruption den where small exporters are fleeced for years for petty sales tax rebate claim payments on their exports while during corruption party rule fake claims worth tens of billions of rupees were quickly paid. Unless FBR is completely cleansed of corrupt elements (seems 99%) this country will never be prosperous for sure

Replying to X

Comments are moderated and generally will be posted if they are on-topic and not abusive.

For more information, please see our Comments FAQ