The current account deficit widened $200 million in July-November compared to the same five-month period of the preceding fiscal year when it was $2.14 billion.
A deficit or surplus reflects whether a country is a net borrower or lender of capital with respect to the rest of the world.
As a percentage of the gross domestic product (GDP), the current account deficit stood at 2% in July-November as opposed to 2.1% in the same period of the last fiscal year.
In November alone, the current account deficit clocked up at $475 million. SBP data says the country had a current account deficit of $223 million in October.
Increasing imports and decreasing exports have widened Pakistan’s current account deficit during the first five months of 2014-15. Pakistan exported goods worth over $9.94 billion in July-November as opposed to exports of goods totalling $10.14 billion in the comparable months of 2013-14, reflecting a year-on-year decrease of about 2%.
The value of goods exported in November decreased by $198 million on a month-on-month basis to $1.89 billion, which is 9.47% less than the exports of $2.1 billion recorded in October.
Pakistan’s total imports of goods in July-November were $18.55 billion as opposed to $17.51 billion in the comparable period of 2013-14, which means an annual increase of 5.9%.
On a month-on-month basis, however, the value of goods imported decreased to $3 billion. From imports of goods valuing $3.52 billion in October, the month-on-month decline remained 13.77% in November.
Total oil imports constitute 36% of Pakistan’s total import bill. According to Topline Securities, a 30% decline in oil prices is likely to result in annual savings of $4 billion or 1.5% of GDP. As a result, Pakistan is likely to witness current account surplus in 2015-16, it says.
The balance of trade in both goods and services at the end of the first five months of 2014-15 clocked up at -$9.6 billion as opposed to the deficit of $8.68 billion recorded in the same period of the preceding fiscal year.
Workers’ remittances remained $7.39 billion in July-November, up 15.48% from the same five months of the last fiscal year when they totalled $6.4 billion. Workers’ remittances in November clocked up at $1.32 billion, registering a decline of almost 4.48% on a month-on-month basis.
The country’s balance of payment (BoP) position weakened in 2013-14, as foreign exchange reserves held by the central bank decreased to only $2.8 billion in February.
With an import cover for less than a month, a low level of foreign exchange reserves prompted federal authorities to force exporters to bring their dollar-denominated revenues into the rupees before the stipulated limit of 120 days.
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 $9.34 billion.
Published in The Express Tribune, December 24th, 2014.
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