Widening gap: SBP tries to get it right with current account data

Says deficit increased to more than $2.92b in 2013-14.

KARACHI:

In sharp contrast with the earlier projection of the State Bank of Pakistan (SBP), the country’s current account deficit increased to more than $2.92 billion in 2013-14, according to data released by the central bank on Monday.

The current account deficit for 2013-14 has widened by $429 million since the end of the preceding fiscal year when it stood at $2.49 billion.

The central bank had released ‘provisional’ current account deficit for 2013-14 on Friday, but withdrew it within a couple of hours. According to the provisional set of data, the current account deficit was $3.34 billion for the last fiscal year.

Latest data shows that SBP underestimated the expected current account deficit in its Jan-Mar report released two weeks ago as it expected the full-year current account deficit to “settle between $2-2.5 billion”.

The current account deficit remained $89 million during June alone. On a year-on-year basis, it decreased by $74 million, as it stood at only $163 million in June 2013. Interestingly, provisional figures released last week showed June’s current account deficit to be as large as $510 million.

Shown as a percentage of the gross domestic product (GDP), the current account deficit for 2013-14 widened to 1.18% as opposed to 1.06% recorded in the last fiscal year. Notably, the current account deficit figure is largely in line with the estimate given by the International Monetary Fund (IMF). According to third review of the Extended Fund Facility released on July 7, the IMF envisaged Pakistan’s current account deficit to be around 1.2% of the GDP.

Had it not been for substantial inflows in terms of foreign direct and portfolio investments, Pakistan’s current account deficit would have been significantly higher. Improvement in home remittances and receipt of Coalition Support Fund money helped restrict the current account deficit in the third quarter of 2013-14 to about one-third the deficit recorded during the same quarter of the preceding fiscal year.

Exports/Imports

Pakistan exported goods worth $25.16 billion in 2013-14 as opposed to exports totalling $24.8 billion in the preceding fiscal year, reflecting year-on-year increase of only 1.48%. In the April-June quarter, exports of goods amounted to $6.35 billion, which is higher than the value of goods exported in each of the other three quarters. Total imports of goods in June were $3.57 billion, which is equal to the value of goods imported in the preceding month. As per the provisional data released last week, however, June imports showed a spike of 9.24% month-on-month. For the last fiscal year, goods’ imports increased to $41.6 billion, up 3.8% from $40.1 billion in 2012-13.

Remittances

Workers’ remittances in 2013-14 increased to $15.83 billion, registering an increase of 13.72% over the preceding fiscal year when they equalled $13.92 billion. They remained almost $1.5 billion in June, up 8.7% from the preceding month when they totalled $1.38 billion. SBP set the target of $15.1 billion for workers’ remittances in 2013-14. The growth was expected primarily due to a rise in the number of Pakistanis working abroad with tighter compliance of anti-money laundering laws.

Foreign direct investment (FDI) in Pakistan in 2013-14 clocked up at $1.63 billion, up 12% from FDI of $1.45 billion received in the preceding year. Foreign portfolio investment in Pakistan amounted to $2.74 billion in 2013-14, showing an increase of almost 22 times over 2012-13.

Published in The Express Tribune, July 22^nd, 2014.

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