KARACHI: Pakistan’s current account deficit continued to expand, adding to the worries of economic managers as the gap widened 50.6% year-on-year to $12.03 billion in the nine months of the current fiscal year.
The State Bank of Pakistan (SBP) reported that the deficit now stands at over $12 billion during July-March, just shy of last-year’s 12-month figure of $12.62 billion. The nine-month deficit for 2016-17 amounted to $7.99 billion.
The growth in the current account deficit suggests that measures taken by the government have yet to take effect, which includes devaluation of the currency in two phases, and imposing regulatory duty to curtail imports.
A widening deficit eats up a country’s foreign exchange reserves, putting it at risk of a balance of payments crisis.
Economists have estimated the full fiscal year’s deficit to stand at around $16 billion.
Analysts say the deficit may continue to increase by an additional $100 million per month on a year-on-year basis due to uptrend in international oil prices, as Pakistan remains a net oil and gas importing country.
Experts anticipated the government would further devalue the rupee against the dollar and other world major currencies during the ongoing fiscal year to bring the currency at par with its peers in order to create some sort of balance in external trade and the overall economy.
In a statement issued on Thursday, the central bank said exports of goods increased 11.97% to $18.26 billion in the nine-month period, compared with $16.31 billion in the same period last year.
However, the import of goods surged 16.60% to $40.56 billion from $34.79 billion in the corresponding period last year.
The influx of foreign shipments remains on the higher side due to heavy imports of machinery and other construction material for multi-billion dollar projects under the China-Pakistan Economic Corridor (CPEC).
The trade deficit (of goods and services) increased 22.48% in the period under review to $26.15 billion from $21.35 billion.
Workers’ remittances, which play a significant role in financing the current account deficit, has started showing positive trends in recent months due to deprecation of the rupee.
Total remittances for the first nine months of the current fiscal year amounted to $14.60 billion, 3.55% higher than $14.10 billion in the corresponding period last year, the central bank reported.
Foreign direct investment in the nine months improved 4.4% to $2.09 billion from $2 billion in the same period last year. However, a significant portion of the foreign investment in local businesses is coming from China.
Published in The Express Tribune, April 20th, 2018.