KARACHI: The current account deficit in the first seven months of 2017-18 amounted to $ 9.1 billion, up 48.1 per cent from a year ago.
According to data released by the State Bank of Pakistan (SBP) on Tuesday, the gap was $ 1.6 billion in January, which is almost 29 per cent higher than the preceding month.
Current account sums up a country’s overseas transactions, such as net trade, earnings on cross-border investments and transfer payments.
The widening deficit in Pakistan’s current account balance is reflective of growing difficulties on the external front of the economy. It widened to $ 7.4 billion in the first half of the fiscal year, up 1.6 times the gap registered a year ago.
The central bank drew attention to the widening deficit in the monetary policy statement last month. It said the current account balance was under pressure due to a high level of imports. This was the reason the central bank let the rupee slide against the dollar in December – a measure that, the SBP expects, will help ease the pressure on the external front.
Exports of goods amounted to $ 13.9 billion in July-January, up 11.8 per cent from a year ago. But the corresponding rise in imports, which were worth $ 31 billion, remained 18 per cent over the same period. This shows imports are growing at a faster pace than exports, further widening the gap between inflows and outflows. Workers’ remittances rose 3.5 per cent to $ 11.4 billion at the end of the seven-month period.
Thanks to the recent devaluation, incentives announced under the export package, downward revision in regulatory duties, favourable external environment and expected increase in remittances, the central bank believes that the current account deficit will witness a gradual reduction in coming months.
“While the increase in international oil prices poses a major risk to this assessment, managing the overall balance of payments in the near term depends on the realisation of official financial flows,” it said.