In figures released by the State Bank of Pakistan (SBP) on Wednesday, it was revealed that the current account deficit for the first nine months of the FY2016-17 had risen by 2.6 times in comparison to a year ago, and was recorded at $6.13b.
This massive increase in current account deficit was largely in line with predictions made by financial pundits and did not come as a shock in any given sense of the word. This was largely expected due to rising pressure on the external front that has impacted dollar inflows greatly. As the trade deficit soared to an alarming all-time high of $23b during the period of July-March, it greatly impacted the balance between the forex exchange inflows and outflows.
If this pattern continues, the current account deficit could end up reaching to $8b by the end of the current financial year 2016-17, which could end up creating hiccups for the country to meet its foreign obligations as per the opinion of independent economists. Not only will this impact Pakistan’s ability to pay back its loans but the bond ratings may also register a decline in the international market.
The exports for the first 9 months of FY 2016-17 lingered around $16b and remained mostly unchanged in comparison to the previous year. In actuality, it was the imports that ballooned to $33.8b and registered an increase of more than $4b from the same period a year ago.
In the first nine months of the financial year 2016-17, the government failed to woo foreign investors and foreign direct investment (FDI) although registered an increase of 12pc remained much less than neighbouring countries. The FDI for the period of July-March 2016-17 was a meagre $1.6b.