Printer Friendly

CURRENT ACCOUNT DEFICIT, GDP RISES IN JULY-NOV.

Byline: MOHAMMED ARIFEEN

Pakistan's current account deficit is up to negative $2.601 billion in July-November of the current fiscal year owing to the declining exports and low direct investments, according to data released by the State Bank of Pakistan (SBP). Pakistan Gross Domestic Product (GDP) has increased to $133.283 billion, up by 12.12 percent in July-November 2016-17, compared to $118.874 billion in five months of the previous fiscal year. According to the SBP's projection, full year GDP would increase by 5 to 5.50 percent in the ongoing fiscal year.

Pakistan current account deficit reached $2.6 billion. This rose over 90 percent, in first five months of this fiscal year 2017 due to higher deficit of goods and services trade, besides slow foreign inflows.

The State Bank of Pakistan's statistics revealed that the country's current account deficit continues to worsened, posting a phenomenal increase of 90.96 percent during July-November of current fiscal year.

Current account balance reordered a $2.601 billion deficit during July-November of fiscal year 2017 compared to $1.362 billion in the corresponding period of fiscal year 2016.

Month-on-month basis, during November 2016, current account posted a vigorous deficit of $839 million compared to $381 million in October 2016.

The worsening in current account balance is a menace to the country's foreign exchange reserves as the government is compelled to spend millions of dollars every month to finance the current account.

Major deficit has been occurred from the goods and services sector. The detailed analysis depicts that cumulative deficit of goods, services and income rose by 9 percent or $953 million during the period under review.

Total deficit of goods, services and income sector surged to $11.8 billion in first five months of the current fiscal year against the deficit of $10.874 billion in the same period of last fiscal year.

Pakistan's overall goods deficit stood at $8.62 billion with $8.708 billion exports and $17.328 billion imports in July-November of fiscal year 2017, while previously the deficit stood at $7.583 billion in the corresponding period of last fiscal year.

An increase of 40 percent or $403 million, the deficit of services sector stood at $1.399 billion in first five months of fiscal year 2017 compared to $996 million in the corresponding period of fiscal year 2016.

Likewise with $2.026 billion payments and $245 million receipts, income sector deficit fell to $1.781 billion during July-November of current fiscal year.

The position of current exports and imports has improved in October and November this year, but still, it is not much better while the remittances have also improved in November this year.

The situation of balance of payments will further deteriorate if the trade gap would not shrink, and remittances and direct investment of the country would not improve in the remaining months.

Despite lowest oil import bills in last five months, it is very much surprising that the trade deficit of the country is persistently rising; while on the other hand, the oil prices in the international market have started rising as compared with 2015-16.

With the recent international oil prices, the import bill of oil companies in Pakistan will enhance.

The central bank is facing payment pressure of international donor agencies including the International Monetary Fund (IMF) as the current account is still hovering in deficit.

The pressure on dollar, the dollar exchange rate has gained 30 paisas and now it is being traded in the inter-bank market at Rs 104.85 today compared to $104.60 about 30-40 days ago.

The declining trend in the goods exports continued in July-November 2016-17 and the total exports of the country stood at $8.189 billion, down by 3.94 percent, in comparison with $8.542 billion in the same period last year.

The country's total foreign investment surged by 36.6 percent to $1.505 billion, mainly supported by foreign public portfolio investment which was improved by 151 per cent during July-Nov 2016-17.

The direct investment declined by 45.2 percent to $459.8 million in July-Nov 2016-17. Out of this investment, the Chinese companies invested $156.5 million.

The remittances of the country fell by 2.4 percent to $7.875 billion in the first five months (July-November) of the current fiscal year, as compared to $8.073 billion received in the same period last year.

The gap in the remittances has shrunk in November to $197 million, 2.4 percent, as compared to the last year, while it was going above 3-4 percent down in the previous months of the current fiscal year.

Pakistani workers remitted $7.875 billion in first five months, compared with $8.073 million received during the same period in the preceding year.

Declining exports and slowdown in remittances may create major problems for the government because the country heavily depends on remittances as they play a major role in stabilizing the country's external sector.

Increase in current account deficit means the government faces pressure to address the country's balance of payments position in the medium- to long-term.

Economists believe this current account deficit is positive for the country in the present situation because it is led by investments instead of consumption.

Due to the construction phase of China-Pakistan Economic Corridor (CPEC), Pakistan is witnessing more outflows than inflows. The investments are being made due to which the country is witnessing a current account deficit in the short term, but the situation will change once the returns of CPEC start coming in.

On a month-on-month basis, the value of goods imported rose by a significant 13 percent, as Pakistan imported goods valuing $3.77 billion in November 2016 compared with $3.34 billion in October 2016.

Balance on trade in both goods and services at the end of the first five months tied up at deficit $10 billion compared with the deficit of $8.58 billion recorded in the same period of the preceding fiscal year.

Moreover, the country has also been facing low levels of foreign direct investment (FDI).

Emergency steps are needed to be taken to reduce higher goods and services imports otherwise the current account deficit will mount further in coming months.
COPYRIGHT 2017 Asianet-Pakistan
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2017 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Publication:Pakistan & Gulf Economist
Geographic Code:9PAKI
Date:Jan 1, 2017
Words:1144
Previous Article:FULL-GROWN FOREIGN INVESTMENT ENVIRONMENT - China to set up a large steel factory in Pakistan.
Next Article:PLIGHT OF THE NATIONAL HIGHWAY.
Topics:

Terms of use | Privacy policy | Copyright © 2019 Farlex, Inc. | Feedback | For webmasters