Current account deficit narrows 23 percent in July-Jan

KARACHI: Pakistan’s current account deficit narrowed 23 percent to $2.036 billion in the first seven months of the fiscal 2015/16, the central bank said on Friday. 

The State Bank of Pakistan’s (SBP) data showed that current account deficit stood at $2.641 billion in the corresponding period of the last fiscal year.

“The slow growth in remittances has affected the balance of payment,” analyst Khurram Schahzad said.

The remittances registered a growth of six percent to $11.2 billion in the first seven months of the current fiscal year. However, the remittances declined 10.64 percent to $1.46 billion in January over the preceding month.

“With the ease in international oil prices and hopes of increase in textile exports following gas tariff cut, the current account deficit is expected to go below one percent of GDP,” Schahzad said.

The current account deficit widened $610 million in January whereas the deficit in December 2015 was recorded at $438 million.

In July-Jan 2015/16, trade deficit was recorded at 4.31 percent. The exports dipped 14.37 percent to $12.08 billion in the period under review over the same period last year.

Falling imports, however, gave some relief to balance of trade. “Global economic slowdown and local structural inefficiencies took toll on exports, but relentless decline in oil prices continued to provide relief through cheaper imports,” said Shiraz H Zaidi at Arif Habib Limited.

In July-Jan 2015/16, total foreign direct investment inched up 4.6 percent to $648 million. 

Experts hoped that inflows under the China-Pakistan Economic Corridor (CPEC) would increase in the coming months, which would help in reducing the current account deficit.

The net FDI from China posted 120 percent growth to $409 million during July-January 2015/16.

The foreign investment amounted to $186.2 million in the corresponding period of last year.

“Machinery imports will be offset by higher FDI as the localisation of materials is expected at 10 percent,” said Saad Hashemy at Topline Securities.