KARACHI: Current account deficit widened to more than $2 billion in the first seven months (July-January) of this fiscal year, rising by $610 million in January alone.
The rising trend indicates that despite higher inflows, the FY16 deficit could still cross last fiscal year’s level of $2.6bn.
The first quarter of this fiscal year witnessed a deficit of $351m while the second-quarter figure surpassed $1bn.
The State Bank of Pakistan said on Friday the country’s trade and services collective deficits are almost equal to the exports.
Exports significantly declined during the seven-month period, fuelling the widening of current account deficit.
The current account is the broadest measure of trade, covering not only the flow of goods and services but also investment flows.
The deficit could be much higher in the next five months since the country would begin to increase the debt servicing. The external borrowing has increased size of the debt servicing while some old rescheduled debts like Paris Consortium debts would require repayments from FY16.
Meanwhile, overseas Pakistanis have kept increasing the remittances, sending home $11.2bn in July-January FY16, close to the country’s exports of $12.5bn during the period.
The country has saved about $3.32bn on imports of oil petroleum products during the seven months, but the current account deficit has eaten up benefits of the savings.
Experts believe that falling exports and increasing debt servicing were the real cause of the current account deficit.
However, the poor foreign investment is another reason for the rising deficit; higher foreign direct investment could mitigate the impact of low exports and higher debt servicing.
The government is hopeful that inflows under the China-Pakistan Economic Corridor would help to reduce the current account deficit but so far its impact is negligible due to poor inflows under the head.
Courtesy : Dawn News