Current account records $81m deficit

Widening of gap attributed to drop in remittances.

KARACHI: The current account deficit stood at $81 million in the first seven months of the current fiscal year, as compared to a massive deficit of $3.05 billion during the same period in the previous year, according to data released by the State Bank of Pakistan on Friday.

The current account deficit during the month of January was recorded at $62 million. This stands in sharp contrast to the surplus recorded in the month of December, which amounted to $570 million.

“The widening of the deficit is mainly attributable to a slowdown in remittances during the month of January compared with the previous month,” said InvestCap Head of Research Khurram Shehzad.

He added that the services account “recorded a helpful gain because of the receipt of money from the Coalition Support Fund in December.”

The data revealed that the country’s exports fell by about three per cent in January, compared with December, however, imports saw a steeper decline of 11 per cent during the same period.

Analysts commented that in the previous fiscal year, surging prices of oil and other commodities that were imported caused a vast deficit in the current account. Much of the import growth has been stalled in the current fiscal year due to lower prices as well as subdued demand in the wake of the recent deluge.

“On the other hand, remittances had been increasing by about 20 per cent per month over the last few months and a slowdown on that front can be an irritant to the current account balance,” said Shehzad.

Published in The Express Tribune, February 19^th, 2011.