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Thursday March 28, 2024

Pakistan’s July-August current account deficit narrows to 0.8pc of GDP

KARACHI: Pakistan current account deficit narrowed to 0.8 percent of the gross domestic product in the July-August period of the current fiscal year, as low global oil prices kept trade deficit low while remittances into the country remained robust. The current account deficit is a stark turnaround from the high

By Erum Zaidi
September 19, 2015
KARACHI: Pakistan current account deficit narrowed to 0.8 percent of the gross domestic product in the July-August period of the current fiscal year, as low global oil prices kept trade deficit low while remittances into the country remained robust.
The current account deficit is a stark turnaround from the high of 3.2 percent of GDP registered in the same period of the last fiscal year.
The current account deficit in the first two months of the fiscal year 2015-16 was a provisional narrowed to $394 million as compared with a deficit of $1.456 billion in the same period last year, the central bank said on Friday.
The figures on balance of payments issued by the State Bank of Pakistan (SBP) revealed that the current account deficit narrowed around 73 percent during the first two months of current fiscal.
It remained at to $219 million in August 2015 as compared to $175 million in previous month.
The deficit narrowed as benchmark Brent crude fell sharply during the previous quarter, tumbling at one point to its lowest since April 2009. Oil prices are a key factor for Pakistan, given the country imports nearly 80 percent of its oil requirements.
That also helped narrow the trade deficit in the July-August period to $3.157 billion from $4.222 billion same period last year. Pakistan’s exports goods stood at $3.538 billion as compared to $3.799 billion in comparable period of last fiscal year. Imports were down to $6.695 billion from $8.021 billion a year earlier.
The Pakistan Bureau of Statistics data also shows oil import payments declined to $681.46 million in July 2015 as compared to $911.20 million in the same month of the last fiscal year. The oil import bill fell by 21 percent to $11.695 billion in FY15.
Pakistan trade in goods and services registered a smaller deficit than it had the year before. It stood at $3.422 billion in Jul-August FY16 against $4.724 billion during July-August FY15.
The improvement in services deficit is outcome of the $337 million worth of Coalition Support Fund (CSF) disbursements come into the country during July this year.
Workers’ remittances have been helping the current account to run at comfortable level, but the latest month-on-month slowdown in cash sent in by the Pakistani diaspora working abroad is a sign of worry for the external sector of the economy.
Pakistan attracted $119 million in net financial inflows in two months of this fiscal year. This is higher than July-August FY15, as China brought out cash into the country through making investments in power generation projects.
The central bank policy makers foresee the current account deficit will remain at the same level as was in the last fiscal.
The expected surplus in the capital and financial account in FY16 on the back of planned Euro/Sukuk bonds inflows, official disbursements, and the remaining IMF funding under the EFF program would improve balance of payments further bolstering the foreign exchange reserves to $21 billion by the end of this fiscal year as predicted by the Federal Finance Minister.