1MFY15: Current account deficit swells

Gap widens to $454m as opposed to $125m during corresponding month of previous year.

KARACHI:

Pakistan’s current account deficit in the first month of 2014-15 increased to more than $454 million as opposed to $125 million recorded in the corresponding month of 2013-14, according to data released by the State Bank of Pakistan (SBP) on Friday.

The current account deficit has widened by $319 million in July over the preceding month when it stood at only $135 million. It amounted to $2.97 billion at the end of 2013-14.

As a percentage of the gross domestic product (GDP), the current account deficit widened to 1.9% in July as opposed to 0.6% in the same period of the last fiscal year.



The country’s balance of payment (BoP) position deteriorated during the last fiscal year, as foreign exchange reserves held by the central bank reduced to just $2.8 billion in February. Low foreign exchange reserves provided import cover for less than a month, prompting the ministry of finance to arm-twist exporters to bring dollars back into the banking system.

SBP-held reserves improved following alleged intervention from policymakers into the foreign exchange market, resulting in a year-on-year increase of more than 50% by the end of the fiscal year in June. SBP-held reserves currently stand at $8.9 billion.



Pakistan exported goods worth $1.9 billion in July as opposed to exports totalling $2.2 billion in the comparable month of 2013-14, reflecting a year-on-year decrease of 13.2%. The value of goods exported in July decreased by $184 million on a month-on-month basis, which is 8.8% less than the exports of a little over $2 billion recorded in June.

Pakistan’s total imports of goods in July were almost $3.8 billion as opposed to $3.4 billion in July 2013, which means an increase of 10.2%. on a month-on-month basis, the value of goods imported increased 6.1%, as Pakistan imported goods valuing $3.5 billion in June.

Balance of trade in both goods and services at the end of the first month of 2014-15 clocked up at negative $2.1 billion as opposed to the deficit of $1.4 billion recorded in the same month of the preceding fiscal year.



Workers’ remittances remained $1.6 billion in July, up 17.4% from the same month of the last fiscal year when they totalled $1.4 billion. Workers’ remittances increased by $150 million in July, registering a rise of 10% on a month-on-month basis. The substantial increase during the last month was because of Eid, which is typically preceded by larger than usual workers’ remittances. They amounted to a little less than $1.5 billion in June.

Published in The Express Tribune, August 23^rd, 2014.

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