Pressure on rupee more imminent

Sliding even more sharply, the current account deficit was recorded at $1.19 billion in January 2017, compared to $1.02 billion in December 2016. The dip came on the back of 7.3 per cent (month on month) increase in trade deficit and 6 per cent (month on month) decline in January 17 remittance flows.

Consequently, the deficit of the seventh month of current fiscal year stands at $4.7 billion (1.5 per cent of GDP), up 90 per cent year on year from $2.5 billion during the same time last year.

Analysts at SKD Securities believe that going forward, sharper deterioration is expected with CAD rounding off at 1.85 per cent of GDP in fiscal year 2017 on weaker trade deficit and slowdown in remittance.

This adds to an already worsening Forex reserve position as foreign debt flows (net of repayments) in fiscal year 2017 at $1billion have been lower than $1.3billion in the corresponding period.

Article continues after this advertisement

Resultantly, import cover on State Bank of Pakistan held reserves now stands at 4.6million, compared to 5.4 million at the end of fiscal year 2016, opening room for considerable pressures on rupee/dollar parity.

Currently, reiterating our 2017 rupee/dollar average depreciation forecast of 1.7 per cent year on year, analysts flag space for further devaluation if import cover dips below 4.3 million during the year, particularly with hefty repayments ($1.2 billion in June17) looming ahead.

- Advertisement -
- Advertisement -

Must Read

Xiaomi plans to set up smartphone assembly unit in Pakistan

BEIJING: Xiaomi, the second biggest smartphone company in the world, is planning to set up its assembly unit in Pakistan in the next 3-4...