As the economy grows, glaring variations have surfaced in projections of current account deficit by the government that sees the deficit at over $13 billion and the central bank which is foreseeing it at only $8 billion in the current fiscal year.
Minister for Finance Shaukat Tarin on Friday chaired a second meeting on the status of external inflows and outflows during the three-year period - 2021-24.
Sources told The Express Tribune that the presentation given in the meeting showed that the State Bank of Pakistan (SBP) and the Ministry of Commerce were not on the same page when it came to projections of the current account deficit, imports and exports.
The central bank projected about $8.1 billion current account deficit in the current fiscal year, which was roughly 60% less than the estimate of the commerce ministry, according to the sources.
The ministry was projecting over $13 billion current account deficit - almost equal to the one booked by the Pakistan Tehreek-e-Insaf (PTI) government in its first year in power.
Prime Minister Imran Khan and his economic team have been taking credit for turning a $19 billion deficit in the last year of the Pakistan Muslim League-Nawaz (PML-N) government into a surplus for a few months in the last fiscal year.
However, as the economy starts picking momentum so does the external sector vulnerabilities. The rupee has already come under pressure and shed its value by Rs10 or nearly 7% against the US dollar in just two months.
For the next fiscal year 2022-23, which will be the last year of PTI’s five-year term, the commerce ministry has projected over $17 billion current account deficit as against $10 billion shown by the central bank, said the sources.
Tarin has been holding meetings to gauge Pakistan’s external sector position before presenting it to the prime minister for a decision on the country’s relations with the international financial institutions.
During a meeting last week, Pakistani authorities had estimated $87.3 billion worth of debt and non-debt creating external inflows in the current fiscal year but the data of outflows in the shape of imports and other payments was missing.
The $87.3 billion estimate of foreign inflows during fiscal year 2021-22 is based on the assumption that the International Monetary Fund (IMF) programme will continue, which has again derailed after remaining active for just a couple of months.
Sources said that the key reason behind the different set of current account deficit numbers was the projection of imports and exports by the central bank and the commerce ministry.
The central bank projected $61 billion in imports in the current fiscal year, up by $7 billion or 13%, said the sources.
However, the commerce ministry told the meeting that imports would surge to a record $70 billion in the current fiscal year, up by $16 billion or nearly 30%, said the sources.
They said that the commerce ministry projections were based on the actual outcome of July when imports stood at $5.4 billion. Historically, in July the imports remained at only 7.5% of the annual imports in a year, the sources said.
The commerce ministry’s estimates are also based on growing imports of food items like wheat and sugar and increased requirements of crude oil due to the expansion in economic activities.
The ministry has also taken into account the impact of increasing requirements of raw material and machinery imports, said the sources.
Similarly, there are also differences of opinion between the Ministry of Commerce and the SBP on the export data. The central bank projected $27 billion worth of exports in the current fiscal year while the commerce ministry put it above $31 billion.
Due to the different sets of statistics, the finance minister directed both the central bank and the commerce ministry to reconcile their numbers and present them next week, said the sources.
The possibility was that the export numbers would be revised downward and the import figures would be pushed upward, said the sources.
During the meeting, the central bank again highlighted the chances of reduction in worker remittances and requested the finance minister to approve new incentives to avert any interruption in the inflows.
Tarin directed the finance secretary to present a summary in the next Economic Coordination Committee meeting.
Remittances have been projected at $31.3 billion during this fiscal year, a growth of 7.8% over the last fiscal year.
Foreign loans have been projected at $14.1 billion for this fiscal year, excluding any disbursements by the IMF, said the sources.
The minister gave directives for expediting the trade finance facility utilisation and also sought to address issues affecting disbursements against World Bank loans.
The Board of Investment objected to the investment-related projections made by the central bank, said the sources.
Published in The Express Tribune, August 7th, 2021.
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