Current account deficit narrows to $1.52 billion in July-April

KARACHI: The country’s current account deficit narrowed 18 percent to $1.52 billion in the first 10 months of the current fiscal year, the central bank said on Friday, as foreign investment and remittance inflows improved the balance of payment position. 

The State Bank of Pakistan (SBP) data showed that the current account deficit amounted to $1.84 billion in the July-April period of the last fiscal year. 

The current account deficit stood at 0.6 percent of GDP in the period under review as compared to 0.8 percent in the comparable period. 

Analysts forecast the rate at one percent for this fiscal year. The deficit was 1.3 percent in 2014/15 and one percent in 2013/14.

The analysts attributed the deficit contraction to improvement in financial accounts where deficit shrank 21 percent to $2.629 billion in July-April 2015/16.

Foreign direct investment (FDI) is the major component in the financial accounts. FDI grew 5.38 percent to $1.017 billion in the period under review.

However, global economic turmoil slowed down inflows in equity markets. There was $400 million worth of outflow in portfolio investment in July-April 2015/16 as compared to inflows of $1.771 billion in the same period a year earlier.

The lower deficit was also owing to inflows of secondary income, which increased to $18.53 billion from $18.09 billion. The major components of secondary income are official transfers, remittances and transfers of corporations. 

In July-April 2015/16, remittances rose 5.24 percent to $16.034 billion.

The SBP data further showed that the disbursement of short- and long-term loans increased to $4.661 billion in the first 10 months of the current fiscal year as against $2.84 billion in the same period a year ago. The country received $3.32 billion in long- and $1.34 billion in short-term loans in the period under review as against $1.93 billion and $915 million, respectively a year earlier.

The trade balance, however, weakened the balance of payment position. In July-April, the trade deficit widened 6.68 percent as exports fell 13 percent.

In April alone, the import bill swelled to $3.87 billion as against $3.569 billion in March, depicting 8.49 percent growth.

An analyst said the increase in global commodity prices will enable Pakistan to earn more foreign exchange through exports in the next few months.