External account posts surplus of $1.6b

KARACHI – The second quarterly report on Pakistan’s economy, issued by the State Bank on Friday, has revealed that the country’s external account has posted a surplus of $1.6 billion in the first eight months of the current fiscal year.
This, explicitly, means that external account surplus of the cash-strapped country registered a robust 220 percent or $1.1 billion growth during July-February FY11. According to central bank’s executive summary, external accounts exhibited a surplus of $0.5 billion during the same period last year (FY10).
“Improvement in the country’s external accounts is propelled by a contraction in the current account deficit,” the State Bank said. It disclosed that, during the period under review, the country’s current account deficit had declined to $0.1 billion against $3.0 billion in the corresponding period last year. “As against the current account; financial account surplus declined significantly,” the regulator said.
The SBP said that, although, current transfers and services had considerably contributed in improving the current account balance, the 23.7 percent growth in cost-pushed exports was the most encouraging aspect in July-February FY11.
The bank, however, warned that the country’s current account could deteriorate “slightly” due to a rise in imports, which increase in response to higher international commodity prices.
The central bank indicated that the country’s financial account had deteriorated in first half of the current financial year due to a fall in investments and loans. “Improvement in financial account is dependent on resumption of the IMF programme,” it said, adding that “Despite the fall in financial flows, surplus in overall external account triggered a rise in foreign exchange reserves (of the country) to a record level and kept the exchange rate stable.”
Inflows of greenback to the country in the current fiscal year remained, largely, on the higher side. The SBP data shows that, during the week that ended on April 02, foreign exchange reserves posted a slender 1.7 percent decline to $17.637 billion, after touching the historic figure of $17.956 billion.
Economic managers, including the State Bank, expect that the country’s exports and remittances receipts would touch the historic $11 and $24 billion limit during the current fiscal year.