Pakistan’s current account deficit narrows to $1.456bln

KARACHI: Pakistan’s current account deficit narrowed in the first nine months of fiscal 2014/15 to $1.456 billion, helping mange the overall budget deficit in three quarters of the current fiscal year.
The current account deficit lessened 0.7 percent of gross domestic product during July to March of fiscal 2014/15, compared with $2.692 billion in the corresponding period of the last fiscal year, the central bank said on Friday.
The bank said during March 2015, the external current account balance posted a surplus of $163 million as against the surplus of $872 million in February.
Analysts said the improvement in the balance of payments is driven by a rise in remittances and other payments from abroad, including aid and soft oil prices that helped cut import bills.
“Narrowed current account deficit is reflective of lower import bill stemmed from plunging oil prices and rising remittance flows from the overseas Pakistanis,” an analyst said.
Remittances increased to $13.328 billion from the previous year, but other current transfers decreased to $2.349 billion compared with 3.037 billion, showing that Pakistan received fewer amounts in aid from the international creditors. Last year, Pakistan obtained $1.5 billion inflows from Saudi Arabia.
Pakistan’s foreign exchange reserves rose to $16.818 billion, while the foreign currency holdings of the State Bank increased to $11.759 billion as on April 10.
Exports declined to $18.122 billion in July-March FY15 compared with $18.746 billion, while imports fell to $30.875 billion as against $31.226 billion a year earlier.
Many analysts predict the current account to show a substantial improvement, driven by a lower import bill, despite weak export performance.
“Despite decline in exports and flat foreign direct investment, the current account deficit is likely to trim,” said Muzzamil Aslam, an analyst.
The data depicted that capital account fell to $353 million compared with $1.766 billion as country paid debt payments to foreign creditors and received less bilateral and multilateral inflows.
While financial account showed a deficit of $2.114 billion owing to sluggish foreign direct investment flows.
Analysts further said the government’s privatisation programme, together with the oil windfall, would boost forex reserves, helping financing of the current account deficit.
They said Moody’s positive comments on Pakistan following the government’s recent selling of its stake in HBL Bank will further boost forex reserves of the country.
The country had already received $500 million in the sixth loan tranche under the International Monetary Fund’s (IMF) Extended Fund Facility bailout package for the country.
The impact of these inflows would reflect on the balance of payment situation in the last quarter of the current fiscal year, analysts said.