Decline in current account deficit likely to persist

Sunday, November 15, 2009
By Israr Khan

ISLAMABAD: A positive swing in current account deficit (CAD) seems permanent, as the gap between exports and imports is narrowing and remittances by expatriate Pakistanis are rising.

According to the Federal Bureau of Statistics (FBS), Pakistani economy racked up $4.47 billion in trade deficit during the first four months (July-October) of fiscal year 2009-10. This is 41 per cent (or $3.11 billion) less than what was recorded in the corresponding month of the last fiscal ($7.58 billion).

This is encouraging that the trade deficit started reducing, which was earlier a major problem that ultimately pushed up the current account deficit, a factor that has disturbed the financial balance sheet of the country for the last couple of years.

Depreciating Pakistani rupee and record high inflation are the other two big problems confronting the economic policymakers with the dilemma of balancing the financial accounts.

Last year in November due to this problem, Pakistan had to enter a $7.6 billion emergency International Monetary Fund (IMF) programme aimed at averting a balance of payments crisis. The loan was increased to $11.3 billion in July this year, of which the IMF has so far disbursed over $5 billion.

The central bank’s latest data reveals that the current account deficit in the first three months July-September of fiscal year 2009-10 fell sharply to negative $462 million, compared with a deficit of $4.258 billion in the same period last year. During this period, workers remittances stood at $2.33 million against $1.88 billion in corresponding period.

Pakistan recorded a current account surplus of $174 million in September 2009, compared with a deficit of $19 million in August, the bank said.

The statistics division says that the economy during July-October 2009-10 pulled in imports worth $10.55 billion depicting a decline of 26 per cent over corresponding period’s imports of $14.27 billion. Exports also dipped to $6.09 billion against $6.69 billion in July-October 2008-09, said statistical bureau’s latest snapshot of trade activity.

In October 2009, trade gap shrank by 30.70 per cent to $1.37 billion against $1.98 billion in same month last year. During the month under review, exports stood at $1.59 billion and imports at 2.97 billion. Last year in same month, exports were recorded at $1.47 billion and imports at $3.46 billion.

Comparing trade activities in October with previous month, exports rose 4.90 per cent from what was recorded at $1.52 billion in September 2009. Imports also up by 22.83 per cent over previous month ($2.42 billion).