Pakistan is facing current account deficit of around $7 billion during the current fiscal year thanks to heavy debt servicing, rise in oil prices and declining exports.The State Bank of Pakistan, in its recently issued second quarterly report on the state of economy,blamed the recovery in international oil prices for growing current account deficit in Pakistan. However, falling exports, rising imports and declining remittances are posing a grave challenge to the financial stability which the government had achieved after going into a three-year extended facility programme of the International Monetary Fund. According to reports, the current account deficit has already touched $5.47 billion in the first eight months of the fiscal year 2016-17 as compared to $2.48 billion in the same period of the last fiscal year. The government circles had shown chest-thumping euphoria when Pakistan was granted GSP plus status by the European Union. It was taken for granted that exports will definitely increase, but the exports have been going in reverse gear for the last four years. It is difficult to imagine how and why the present set up has failed to arrest the situation despite the fact it came to power in the name of business, business and business.
The State Bank has imposed 100 percent cash margin on the import of consumer items to discourage rising imports. However, experts express the apprehension that the government move will increase cost of production in the country. Most of the import are also contain parts and machinery for the development of infrastructure and discouraging would also affect the development work. However, the import of luxury and unnecessary goods should be curtailed which add burden to the foreign exchange reserves. A prudent import policy is need of the hour. The oil bill is also increasing as oil consumption increased by 13 percent from July 2016 to February 2017. The oil import has major share in all the import items in the country but the deficit can be met by increasing exports.
The only panacea to curtail the deficit is to increase industrial production and industrial production cannot be increased until energy crisis are overcome. All the economic indicators are connected to one another and a comprehensive policy is required to keep everything in order. There is a need to revise import and export policies in a manner to classify the countries where there are potentials of exports and the other countries where the import bill could be decreased.
