Pakistan records current account surplus of $76 million in December

KARACHI: Pakistan’s current account recorded an expected surplus of $76 million in December 2014, which analysts attributed to lower global oil and commodity prices.
Current account deficit, however, widens to $2.362 billion in July-December 2014. The deficit was 18 percent higher than $2.001 billion in the same six-month period of last fiscal year, State Bank of Pakistan (SBP) said on Friday.
The central bank said exports and remittances surged by 22.6 percent and 19.8 percent, respectively as against November 2014, where current account deficit was $568 million.
The trade deficit in December 2014 stood at $1.091 billion as against $1.222 billion in November 2014 while workers’ remittances stood at $1.583 billion in December as against $1.321 billion in November 2014.
Although the political stand-off and electricity scarcity, country’s exports were impacted in the first quarter of the current fiscal year, but analysts said things are getting better.
They said it manifests reducing external account pressures due to a combination of restrictive demand management policies and lower international oil and commodity prices. The benefits of falling oil prices in the international market would be seen in the next quarter’s numbers, they added.
Ahsan Mehanti, an analyst at Arif Habib Corp said the country could close the on-going fiscal year with a current account surplus.
“I believe that the country’s import bill would come down by $5.0 billion. Besides, exports are likely to take-off and I hope a 20 percent surge by the end of current fiscal year, given improved relationship with the EU countries, GSP-Plus status and government’s pro-growth foreign policy,” Mehanti said.
The country’s trade deficit stood at $9.773 billion for the half-year period, which is 13 percent higher than the deficit of $8.642 billion in the same period last year. In December 2014 alone, the trade deficit stood at $1.091 billion down from $1.222 billion in November 2014.
Analysts said that the trade deficit was the main driver behind higher current account deficit. The rupee’s recovery following receipt of 3G license and inflows from multilateral donors has impacted export receipts, while the soft prices of cotton in the international market also dented exports.
The rupee that recovered from Rs105/dollar to Rs98/dollar and then stabilized at Rs100/dollar also impacted import payments and resultantly the trade deficit widened. The overall impact was offset by declining oil prices otherwise trade deficit could be even wider.
However, December numbers were quite encouraging and things would improve going forward and trade account as well as current account would be under control.
The deficit on trade in services stood at $200 million in December 2014 and $1.195 billion in July-December 2014 compared with $1.507 billion in July-December 2013.
The country’s primary income also increased by 15.25 percent to 2.312 billion during the period under review as against $2.006 billion earned in the same period last year. Country’s secondary income surged to $10.918 billion, which includes $8.982 billion of workers’ remittances in the half-year.
Analysts said a current account surplus in December created more room for the central bank to cut interest rate when it reviews monetary policy next week. Already, softening inflationary pressure and slower growth were pointing to the possibility of a rate cut.