KARACHI: A reversal in global oil prices accompanied by falling exports the trade deficit widened by 33.1 percent to US$ 17.8 billion in July-March FY2017, remittances and Coalition Support Fund inflows both remained slower over the same period last year, however, the impact was offset by an improvement in the income account, mainly due to lower profit repatriations by oil and gas firms.
Economic Survey 2016/2017 issued on Thursday said that the current account deficit increased to US$ 6.1 billion in July-March FY2017, against US$ 2.4 billion in July-March FY2016. As a percentage of GDP it stood at 2 percent compared to 0.9 percent of the comparing period last year.
During July-March FY 2017 exports declined by 1.3 percent and stood at US$ 16.1 billion as compared to US$ 16.3 billion in July-March FY2016. However Year on Year exports in March, 2017 increased by 1.4 percent. The imports increased by 14.0 percent in July –March FY2017 as compared to last year.
Services trade deficit fell by 1.9 percent during the first nine months of FY2017. This year Pakistan has received inflows amounting to US$ 550 million on account of CSF during July–March of FY2017 against US$ 937 million during last fiscal year. Remittances could not continue its upward growth trajectory during July-March FY2017 the remittances remained US$ 14.058 billion as compared to 14.388 billion during same period last year. Year on year basis remittances inflow dropped marginally by only 1 percent, however, on month on month basis March-February about 20 percent of decent increase is recorded.
The trend will continue in coming months and is expected that the target of US$ 20.2 billion for FY 2017 will likely to be achieved. Net FDI inflows rose 14.8 percent to US$ 1.6 billion in July- March FY2017, against US$ 1.4 billion same period last year. In October, FY2017 foreign currency reserves hit all time high at $ 24.03 billion, of which net reserves with SBP were $18.93 billion and scheduled banks $ 5.10 billion.
However, with the current account deficit widening and not being fully offset by financial inflows, the country’s total liquid FX reserves as on end-March FY2017, declined to US$ 21.57 billion of which SBP US$16.47 billion and Commercial Banks US$ 5.10 billion.
The average exchange rate during July-May 04 FY2017, at 104.79 to a dollar, was down marginally (0.5 percent) against last year’s comparable average of 104.30. The stability in the exchange rate was a result of the still elevated level of liquid reserves available with State Bank of Pakistan.
