The economic observers foresee no instant knee jerks as February provided space for a breather to the country’s otherwise widening current account deficit that during the review month increased modestly to $ 2.952 billion.
The eighth month of this fiscal year, FY12, saw the current account balance sliding by 28.5 percent or $ 104 million to stand at $ 260 million against $ 364 million of January.
The analysts attribute the bridging of the gap during February to a five percent decrease in imports and modest four percent increase in the dollar-hungry country’s exports.
However, on year-on-year basis the balance set in the red zone and widened to $ 2.952 billion during the first eight months, July-January, of current fiscal year. If compared with $ 194 million of corresponding period in FY11, this depicts an upsurge of 1,421 percent or $ 2.758 billion.
As a percentage of the Gross Domestic Product (GDP), the gap remained static at 1.9 percent against 0.1 percent of last year. The period under review witnessed country’s GDP rising to $ 158.504 billion from the previous $ 140.512 billion.
Massive debt repayments, the analysts believe, are the major driving force behind the widening of the current account deficit this year. “The worst scenario may come ahead as the deficit could widen by $ 5.5 billion,” said the economist Asfar Bin Shahid. While Farhan Bashir Khan of InvestCap said the yearly deficit was likely to widen by two percent of the GDP, accounting for $ 2.8 billion.
The State Bank Monday reported that during the said months, the country’s trade deficit swelled by 43 percent to $ 10.515 billion compared to $ 7.349 billion of the July-February FY11.
The exports grew modestly by $ 843 million to $ 16.251 billion against the previous years $ 15.408 billion. Whereas, the imports surged by 18 percent to $ 26.766 billion against FY11’s $ 22.757 billion.
The analysts view that the current upward trend in international oil prices is also believed to increase the volumes of import payments for the dollar-starved Pakistan.
Worker remittances is the only front, the economic managers may take comfort from. According to central bank, overseas Pakistanis sent back home $ 8.593 billion during the review period against $ 6.963 billion they remitted during same period last year. This shows an increase of $ 1.6 billion or 23.4 percent over the same months of last year.
The reimbursements from the foreign loaners and donors also remained restricted to long-term project and program loans worth $ 1.082 billion against last year’s $ 1.410 billion. No short-term commercial loans including that from Islamic Development Bank (IDB) came to the country during the past couple of years.
The real point of concern, the economists view, was the fast closing down of local industries which was adversely reflecting on the production side. “If this goes unchecked we would also have to import those items that have previously been produced at home,” Shahid warned.
Resultantly, the analyst said, the size of imports would go up putting more pressure on country’s already depleting foreign exchange reserves.
The retirement of country’s huge external debts, which the SBP data show have crossed the $ 60 billion mark, a slowdown in exports and decrease in local industries’ production were major attributable factors for the increasing deficit.
Former Finance Minister Dr Hafeez Shaikh and the central bank are reported to have said that the repayment of $ 1.2 billion to the IMF and other liabilities were already budgeted and would, therefore, have a negligible impact on the economy.
The State Bank of Pakistan, in its latest Monetary Policy Statement, said by June 2012 the country was likely to see a current account deficit of $ 3.5 billion to $ 5.5 billion.
