KARACHI: The current account deficit in the first 10 months of 2017-18 amounted to $14 billion, up 50 per cent from a year ago.
According to data released by the State Bank of Pakistan (SBP) on Friday, the gap was almost $2 billion in April. This was up by 61 per cent from the preceding month, data showed.
Current account tracks a country’s overseas transactions, such as net trade, earnings on cross-border investments and transfer payments.
Exports of goods amounted to $20.5 billion in July-April, up almost 13.3 per cent from a year ago. But the corresponding rise in imports, which were worth $45.5 billion, remained 17 per cent over the same period.
Exports have grown at a double-digit rate for the second time since 2010-11. A recovery in advanced economies from the second half of 2017, with the United States, experiencing one of the fastest quarterly growth rates in the last three years, played a key role in the recent surge in exports. It boosted demand for products exported by emerging economies, including Pakistan, according to the SBP.
Exports incentives extended by the government in 2016-17 for promoting exports could also have started yielding results. For example, under the prime minister’s export package, the government allowed duty drawback of up to 7 per cent on the export of garments, home textiles, processed fabric, greige fabric and yarn manufacturing meant for export.
The government also announced exemptions for the textile industry on the import of raw material (customs duty), and textile machinery (sales tax). In the presence of the GSP Plus status, these incentives may have catalysed exports, specifically to the European market, the SBP said.
But the simultaneous rise in imports continued nonetheless. In addition to a higher import bill for petroleum products, increased demand for motorcars, palm oil, pesticides, chemicals, plastic materials and iron and steel scrap contributed to the surge in non-oil imports, the central bank said.
Workers’ remittances rose 3.9 per cent to $16.2 billion at the end of the 10-month period.
The recent depreciation of the rupee against the dollar is likely to help bridge the trade gap. The move to cheapen the rupee against the dollar will curtail imports as they will cost more because of the change in the value of the local currency. Similarly, exports will see a spike in nominal terms because of the devaluation.