Current account surplus falls to $35m

KARACHI: The current account (C/A) surplus of the country was squeezed to $35 million in the month of October 2010, in large part due to an unexpected surge in oil imports.
In September of this year, the current account surplus stood at $424 million, but the surplus fell to $35 million in October, indicating that the slide in the surplus would likely lead to a deficit in 2010-11. The monthly decline in the current account is the outcome of the growing trade deficit, which rose by 26 percent in tandem with a seven percent drop in worker remittances.
The overall balance of goods and services deficit stood at $1.03 billion against $0.8 billion for the month of September 2010.
The imports were higher in the month standing at $2.6 billion, while exports increased by 3.4 percent, standing at $1.8 billion against $1.7 billion witnessed during September. This resulted in trade deficit of $756 million, showing a surge of 26 percent from the previous month, said Saad Khan, an analyst at Arif Habib Limited.
However, from July-October 2011, the current account deficit amounted to $533 million, showing a substantial decline when matched with $1.18 billion in the corresponding period last year, registering an annual contraction of 55 percent.
This has been mainly attributed to lower petroleum imports witnessed during Sept 2010 and record workers’ remittances of $933 million received during the month of Aug 2010. In the wake of the recent floods in the country, oil imports showed an annual decline of 15 percent and 28 percent in August 2010 and September 2010, respectively.
However this scenario was short lived as oil imports rose sharply in October, rising by 48 percent in a single month, to 1.79 million tonnes. This reduced the current account surplus of $424 million in September to only $35 million in October this year.
Khan maintained that remittances remained strong at $855 million, although registering a monthly decline of seven percent in Oct 2010. Record remittances of $932 million in August 2010 and $922 million during September 2010 resulted in a 13 percent annual growth during the fourth quarter of 2011.
The current account deficit is expected to settle at around $7.8 billion alongside a $13.6 billion trade deficit, he said, adding the remittances figures are expected to touch $9.5 billion by the end of 2011.