Govt concedes current account deficit may touch $16 billion

ISLAMABAD: The government on Wednesday conceded that the current account deficit might go up to $15.5 to $16 billion during the current fiscal year. The parliamentarians argued that Islamabad left with no other option but to seek rampant short term borrowings to bridge this yawning gap widening with $2.5 billion with passing of each month.

It was consensus among the members of the National Assembly’s Standing Committee on Finance which met under Chairmanship of Qaiser Ahmed Sheikh that short term commercial borrowing could not provide long term solution in the wake of rising current account deficit.

The current account deficit had already peaked to $9.2 billion for the first seven months of the current fiscal year despite imposition of Regulatory Duty (RD) and other non-tariff barriers. However, one high court had granted stay order making policy makers clueless that how to curtail rising imports in remaining months of the current fiscal year.

Additional Secretary Finance said that the current account deficit was projected to go up to $15.5 to $16 billion but Asad Umar from PTI said that it would touch $17 billion at least. Finance Ministry high-ups admitted that the problem on external account was grave and also that $7 billion current account deficit would be expected in the next five months with $2.5 billion debt servicing liability.

Director General Debt Office at Finance Ministry also shared financing plan. Asad Umar said that as per Finance Ministry’s plan $7 billion debt will increase in the next five months along with a decline of $3 billion in foreign exchange reserves. By the end of fiscal year there will be $13 billion reserves which will include $8 billion short term borrowing, he predicted.

“We are in crisis”, Umar said while urging Finance Division to develop a plan for moving away from short term borrowing because it is primary cause of rapid increase in debt burden. Pakistan’s total debt, he said, will touch $93 billion mark due to risk attached to external position. He said that Pakistan’s debt to GDP ratio would be touching 70 percent by the end of the current fiscal year; however, Finance Ministry’s official said it would be lower to 70 percent.

The committee chairman and members also expressed concerns that government has not been doing anything to increase value added exports, instead exporters sales tax refunds are not being cleared by the tax authorities. As a result exporters have been facing liquidity problems, chairman of the committee added.

 State Bank of Pakistan (SBP) stated adequate measures were in place to manage the problem; however, their impact would become visible after six months. They said that that the country external financing requirement would be around $15.5 billion to $16 billion for the current fiscal year. “We think we are going to peak this year but things will ease out from next fiscal year with decline in imports under China Pakistan Economic Corridor (CPEC),” they added.