ISLAMABAD: The Economic Survey of Pakistan for the outgoing fiscal year 2017-18 has also noted 13.1% increases in exports in last three quarters of the year. Exports are on the increase and the negative effect started bottoming out. Exports during July-March FY2018 reached to $ 17.1 billion as compared to $ 15.1 billion in July- March FY2017
Similarly, imports were up by 15.7% in the first nine months of the current fiscal year, rising from $ 38,369 million during FY-2017 (July- March) to 44,379 million, showing an increase of $ 6010 million in absolute term.
However, in a bid to slow down the imports, an additional regulatory duty was imposed to curtail the inflated imports. Even then balance of payments remained under stress due to rising imports of capital equipment and fuel during July-March FY-2018. Recovery in global oil prices also played a role in pushing up the import bill.
The remarkable growth in exports earnings and remittances inflows was not sufficient to overcome the current account deficit gap; SBP’s liquid foreign exchange reserves declined by $ 4.5 billion during July-March FY-2018.
Pakistan’s current account deficit contracted by 9.2% month on month basis in March 2018 and reached to $ 1.16 billion as compared to $ 1.28 billion in February 2018. However, the current account deficit widened by 50.5% and reached to $ 12.03 billion (3.8% of GDP) during July-March FY-2018.
This was mainly due to 20.7% widening in the trade deficit, amounted $ 22.3 billion. The widening of trade deficit is mainly due to surge in import bill by 16.6% and reached to $ 40.6 billion overshadowed the increased in exports and workers’ remittances. The remittances registered a significant growth of 3.6% during July-March FY 2018 against the decline of 2.0% last year, and reached to $ 14.6 billion during first nine month of current year as compared to $ 14.4 billion during the same period last year.
The trend will continue in coming months and expected that the target of $ 20.6 billion will be achieved. Foreign investment picked up its pace from last year’s levels, with both direct and portfolio investment contributing to the gains.
Net FDI inflows rose 4.4% to $ 2.1 billion in July- March FY-2018, against $ 2.0 billion of the same period last year. While China continued to have a major share (accounting 55% in overall inflows), significant FDI from other countries like Malaysia and UK also witnessed during this year.
Portfolio investment is dominated by official inflows, as government raised $ 2.5 billion through Sukuk and Eurobond. Meanwhile, public flows continued to dominate foreign portfolio investment in Pakistan.
A massive inflow of $ 2.5 billion in second quarter of FY-2018 more than offset net foreign outflows of $ 90 million in the country’s equity market. With the current account deficit widening and not being fully offset by financial inflows, the country’s total liquid FX reserves fell by $ 4.5 billion during July-March FY-2018.
The drop was higher in the first five month of FY-2018, when official reserves decreased by $3.9 billion. The decline came mainly in SBP’s liquid reserves (which at April 18, FY-2018 was $ 11.08 billion), and reserves held by commercial banks $ 6.1 billion during the period.
