SBP revises current account deficit

Gap widens to $4.4b due to earlier underreporting of imports, loans for PSE

ISLAMABAD:

The State Bank of Pakistan (SBP) has revised upward last fiscal year’s current account deficit to $4.4 billion - an abnormally high variation of 50% against the provisional figures, due to earlier underreporting of imports and loans for a public sector enterprise.

The latest summary of balance of payments that the central bank released at the weekend revealed that the SBP had earlier inaccurately reported the current account deficit for fiscal year 2019-20, which ended in June last year.

The revised current account deficit for the previous fiscal year was $4.44 billion or 1.7% of gross domestic product (GDP), according to the central bank.

The Pakistan Tehreek-e-Insaf (PTI) government and the SBP had both stated that the deficit went down from $13.4 billion to just under $3 billion in the last fiscal year.

Even in its latest staff-level report released this month, the International Monetary Fund (IMF) quoted Pakistan’s current account deficit at nearly $3 billion for the last fiscal year. But the latest summary showed that the $3 billion current account deficit was underreported by $1.5 billion or 50%, showed the official statistics.

This is an abnormally high variation between the provisional and revised figures, which warrants a complete review of the government’s data reporting mechanism besides ensuring better coordination between various organs of the state.

The difference was not because of any data integrity issues rather it was due to late or inaccurate reporting of some of the foreign transactions, said a senior federal government official.

The SBP did not reply to request for comments till the filing of the story.

Last month, Pakistan had narrowly avoided censure and sanctions by the IMF due to inaccurate data reporting. In the April 2019 exchange of data with the IMF, the government failed to report Rs357 billion worth of sovereign guarantees to the global lender, which were issued in 2015-16.

These figures were already in the public domain and had been reported by The Express Tribune at that time.

“New information that came to the authorities’ (Pakistan) attention, and which was shared with the Fund’s staff, has revealed that the data on government guarantees dating back to FY16 was reported inaccurately,” said the IMF in March.

The SBP’s latest data showed that in contrast to the earlier reported goods imports of $42.4 billion, imports actually stood at $43.6 billion - a discrepancy of $1.2 billion or 2.9%.

Similarly, imports of services have also been revised upward to $8.8 billion from $8.3 billion - an adjustment of 5.9%.

The central bank has also made upward adjustment in the earlier reported figures of net borrowing. Against the previously reported $2.7 billion worth of net borrowing, the central bank has revised upward the number to $4.2 billion - a difference of $1.5 billion or 55%, showed the new summary.

The figure of net incurrence of liabilities has also been revised upward by over 30% to $7 billion. The central bank had underreported the other sector disbursements by $1.5 billion.

The revised figures showed that disbursements stood at $3.5 billion against the previous figure of $2 billion, showing a discrepancy of 77%.

Sources said that the authorities had already made adjustments in the external public and publicly guaranteed debt of last fiscal year to show consistency in the data.

The discrepancy arose due to underreporting of foreign loans taken on the balance sheet of a public sector enterprise, which was constructing foreign-funded power plants.

They said that it also led to adjustments in the import figures as payments for machinery and plants had been made overseas, which were now reflected in government’s figures.

For this fiscal year, some minor adjustments in the current account deficit have also been made.

During the ongoing fiscal year, the current account has remained in surplus at $959 million in the first nine months (Jul-Mar). There was an improvement of about $5 million in the current account.

Exports of goods and services increased 2% in Jul-Mar 2020-21 compared to the same period of last year. On the other hand, imports of goods and services increased 4%. As a result, the trade balance of goods and services deteriorated by nearly $1 billion.

Published in The Express Tribune, April 28^th, 2021.

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