8MFY15: Current account deficit reads at $1.6 billion

Deficit shrank $839m mainly due to CSF received in February.

KARACHI: Pakistan’s current account deficit in the first eight months of 2014-15 remained $1.6 billion, according to data released by the State Bank of Pakistan (SBP) on Thursday.

The current account deficit shrank by $839 million in July-February compared to the same eight-month period of the preceding fiscal year when it was $2.4 billion. The decrease is mainly attributable to the Coalition Support Fund (CSF), as Pakistan received $717 million in the second week of February.

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 0.8% in July-February as opposed to 1.5% for the same period of 2013-14.

In February alone, however, the current account balance remained in surplus: it amounted to $877 million as opposed to a current account deficit of $74 million in January. The massive improvement in the current account surplus last month was a result of month-on-month increase of 201.4% in the exports of services to $1 billion.

Pakistan exported goods worth over $16 billion in July-February as opposed to exports of goods totalling $16.6 billion in the comparable months of 2013-14, reflecting a year-on-year decrease of 3.5%.

The value of goods exported in February decreased by $145 million on a month-on-month basis to $1.8 billion, which is 7.1% less than the exports of $2 billion recorded in January.

Pakistan’s total imports of goods in July-February were $27.7 billion as opposed to $27.8 billion in the comparable period of 2013-14, which means an annual decrease of 0.4%.

On a month-on-month basis, however, the value of goods imported decreased to $2.7 billion. From imports of goods valuing $2.9 billion in January, the month-on-month decrease remained 5.5% in February.

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 witness current account surplus in 2015-16, it says.

The balance of trade in both goods and services at the end of the first eight months of 2014-15 clocked up at -$12.8 billion as opposed to the deficit of $13 billion recorded in the same period of the preceding fiscal year.

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

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