KARACHI: The country’s current account deficit surged to $2.5 billion in 11 months (July-May).
According to data released by the State Bank of Pakistan (SBP), the current account deficit expanded 1.2%, or $29 million, year-on-year in the first 11 months of the fiscal year. It amounted to over $2.4 billion in the same period of the preceding fiscal year. A deficit or surplus reflects whether a country is a net borrower or lender of capital with respect to the rest of the world.
Although the year-on-year expansion in the current account deficit seems nominal, analysts believe Pakistan should ideally have turned it into a surplus in the wake of record-low oil prices for the most part of 2015-16. However, SBP data shows falling exports have largely offset the gains from lower oil import bill, resulting in the country still struggling to achieve a surplus in its current account balance.
The country’s current account balance was in surplus for April ($23 million), but the last month saw the deficit ballooned to almost $800 million owing to a one-fourth increase in imports of goods in May.
As a percentage of the gross domestic product (GDP), the current account deficit remained 1% in 11 months of 2015-16. The deficit recorded no change on a year-on-year basis, which shows Pakistan has largely missed the opportunity to curb current account deficit despite a massive drop in global oil prices.
Pakistan’s total imports of goods in Jul-May were valued at $36.5 billion as opposed to $37.7 billion in the same 11 months of the preceding fiscal year, which shows an annual decrease of 3.1%.
Pakistan exported goods worth $20.1 billion in Jul-May as opposed to the exports of goods valuing almost $22 billion in the same period of the last year, reflecting an annual decline of 8.4%. Not only Pakistan’s exports are declining, SBP data shows their rate of decline is higher than the corresponding decrease in imports.
Workers’ remittances remained $17.8 billion in July-May, up 5.6% from the same 11 months of the last fiscal year. Remittances have played a significant role in stabilising the country’s external sector, as they make up for almost half of the import bill and cover the deficit in the trade of goods accounts.
