July-September: Current account deficit widens 136%

Rising imports, falling exports, faltering remittances contribute to deficit


Our Correspondent October 20, 2016
Rising imports, falling exports, faltering remittances contribute to deficit. CREATIVE COMMONS

KARACHI: Pakistan’s current account deficit widened by 136% in the first quarter (Jul-Sep) of 2016-17, increasing to $1.37 billion on a year-on-year basis, according to data released by the State Bank of Pakistan (SBP) on Thursday.

With the difference of exports and imports being the biggest determinant of the current account balance, a deficit/surplus reflects whether a country is a net borrower/lender with respect to the rest of the world.

The 136% increase means the deficit more than doubled from $579 million to $1.37 billion, raising further questions on the country’s balance of payments position in the medium- to long-term.

As a percentage of gross domestic product (GDP), the current account deficit widened to -1.7% in first quarter of 2016-17 as opposed to -0.8% in the same period of the last fiscal year.



Pakistan exported goods worth $5.04 billion in first quarter of 2016-17 as opposed to exports totalling $5.31 billion in the comparable period of fiscal year 2015-16, reflecting a year-on-year decrease of 5%. The value of goods exported in September 2016 was recorded at $1.69 billion, down 9.2% compared to $1.85 in August 2016.

Pakistan’s total imports of goods in the first quarter of 2016-17 were $10.2 billion as opposed to $10.07 billion in the comparable period of 2015-16, which means an annual decrease of 1.28%. On a month-on-month basis, the value of goods imported decreased by 17.5%, as Pakistan imported goods valuing $3.21 billion in Sept 2016 compared to $3.89 billion in Sept 2015.

Balance of trade in both goods and services at the end first quarter clocked up at -$6.08 billion compared to the deficit of $5.11 billion recorded in the same period of the preceding fiscal year.

Workers’ remittances remained $4.69 billion in first quarter of 2016-17, down 5.4% from the same period of the last fiscal year when they totalled $4.96 billion.

Analysts say declining exports and slowdown in remittances are going to create major problems for the government.

Pakistan heavily depends on remittances because they play a major role in stabilising the country’s external sector. Remittances make up for almost half of the import bill and cover the deficit in the trade of goods accounts.

Pakistan received remittances amounting to $19.9 billion in 2015-16, up 6.4% from the previous fiscal year. At a time when the country’s exports are on a decline, the current slowdown in remittances has become critical for the country. Moreover, the country has been also facing low levels of foreign direct investment.

Published in The Express Tribune, October 21st, 2016.

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COMMENTS (1)

Laughing Buddha | 7 years ago | Reply Ishaq Dar is the “Finance Minister of the year 2016 for South Asia”
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