7MFY15: Current account deficit shrinks $230 million

Deficit recorded at $2.3 billion in July-January 2014-15.

KARACHI:

Pakistan’s current account deficit in the first seven months of 2014-15 stood at $2.3 billion, according to data released by the State Bank of Pakistan (SBP) on Thursday.

The current account deficit shrank by $230 million in July-January compared to the same seven-month period of the preceding fiscal year, when it was $2.5 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 gross domestic product (GDP), the current account deficit stood at 1.4% in July-January as opposed to 1.8% for the same period of 2013-14.

In January alone, the current account deficit amounted to $95 million as opposed to a surplus of $226 million in December.



Increasing imports and decreasing exports are the reasons behind the current account deficit in July-January. Pakistan exported goods worth over $14.2 billion in seven months as opposed to exports of goods totalling $14.6 billion in the comparable months of 2013-14, reflecting a year-on-year decrease of 2.5%.

The value of goods exported in January decreased by $238 million on a month-on-month basis to $2 billion, which is 10.4% less than the exports of $2.2 billion recorded in December.

Total imports of goods in July-January were $24.9 billion as opposed to $24.7 billion in the corresponding period of 2013-14, which means an annual increase of 0.9%.

On a month-on-month basis, however, the value of goods imported dropped to $2.9 billion. Against imports of goods valuing $3.3 billion in December, the month-on-month decrease was 11.3% in January.

Oil imports constitute roughly 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 record a current account surplus in 2015-16, it says.

The balance of trade in both goods and services at the end of the first seven months of 2014-15 was negative $12.1 billion as opposed to the deficit of $11.9 billion recorded in the same period of the preceding fiscal year.



Worker remittances were $10.3 billion in July-January, up 14.6% from the seven months of the last fiscal year when they totalled $9 billion.

Remittances in January clocked up $1.3 billion, registering a decrease of almost 13% on a month-on-month basis.

Published in The Express Tribune, February 20^th,  2015.

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