The analysts foresee a big challenge for the economic mangers in the months ahead as the country’s current account deficit widened to $ 3.77 billion during first 11 months of the current fiscal year, July-May-FY12. The major source of concern for the government, the analysts believe, would be its depleting foreign exchange reserves to be eroded by the hefty debt repayments to the International Monetary Fund (IMF), especially when the inflow of foreign financing is at the lowest level. The analysts at InvestCap Research said the current account gap swelled to $3.77 billion during 11MFY12 compared to a deficit of just $ 79 million last year, up by a whopping $ 3,691 million.
“The main reason for this widening CA gap this year is huge trade deficit,” the analysts said. During the review period the country’s trade gap ballooned by up 44pc YoY to $13.8 billion whereas it was $9.6 billion during same period in FY11. The widening deficit gap includes rising import bill (up 13% YoY) and flat exports (down 0.3% YoY). Furthermore, the State Bank of Pakistan reported that the current account deficit stood at $ 414 million in May12 as against $275 million in April12, up 50pc MoM.
The statistics also reveals that the country’s exports value and volumes stood on the declining side to reach at USD22.64bn during 11MFY12 period as against USD22.7bn recorded during same period last year, down by meager 0.3%YoY. On the other hand, the import during same period were USD36.5bn, up 13%YoY from USD32.3bn recorded last year. On monthly basis, country’s exports were valued at USD2.17bn, which was 6% YoY lower than the level of USD2.2bn during May-11. However, imports were valued at USD3.32bn in May-12, registering a decline of 0.9% YoY over the import of USD3.35bn during May-11, imports during this year were mainly supported by decline in international oil prices. The worker remittances inflows offered considerable support to the current account as it posted the growth of 19.5%YoY during 11MFY12 to stand at USD12.1bn compared to USD10.1bn recorded last year. Remittances during May-12 stood at USD1.19bn compared to USD1.05bn during May-11, showing surge of 13.5%YoY. “However, on the other hand, the declining trend of international oil and commodity prices could potentially result in CA numbers delivering some relief in 1QFY13,” said the analysts. Also expected, they said, was improvement in the Pak-US relations that could be a key positive development for re-initiation of Coalition Support Fund program and other civilian and military aid foreign flows which will decrease the pressure on country’s external account.
CRUDE DOWN IN ASIA ON PROFIT-TAKING: Crude slid in Asia on Wednesday with traders taking profit from overnight gains as euphoria over a speculated US Federal Reserve stimulus offset persistent worries about Europe, analysts said. New York’s main contract, light sweet crude for delivery in July, fell 19 cents to $83.84 a barrel on its last trading day and Brent North Sea crude for August delivery shed 13 cents to $95.63. Oil traders were cashing out of the market after a rally in late trade Tuesday fuelled by talk of Fed action to boost the flagging US economy, said Jason Hughes, head of premium client management for IG Markets Singapore. “We’ve seen the oil price ease a bit in the Asian session so far, perhaps that’s in line with the view that people might be taking some short-term gains,” he told AFP. The Federal Reserve on Tuesday began another crunch policy meeting under the pall of subpar US jobs growth and a European debt crisis that could slowly squeeze the life out of the global recovery. Many on Wall Street were betting that the bad news forces the Fed to come to the rescue — altering its bond portfolio or piling more assets on its already considerably swollen balance sheet. But Hughes said traders were taking a second look at their expectations of drastic Fed action to jumpstart the economy of the world’s largest oil consumer after the initial euphoria.
JAPAN MOVES ONE STEP FORWARD IN BUYING OIL FROM IRAN: Despite the ban from EU, the parliament of Japan has given the approval to accept the government’s guarantee on insurance for importing crude oil from Iran . The decision of the parliament would pave the way for oil purchase for Japan from Iran.The law will take effect on June 27, a government official said on Tuesday. It allows the Japanese government, which has succeeded in getting a waiver from U.S. financial sanctions, to provide cover of up to $7.6 billion for each tanker carrying Iranian crude bound for Japan in the event of accidents. A European Union ban on member countries importing Iranian oil takes effect on July 1 and includes a ban on EU insurance firms from covering Iran’s exports. That is a headache for Japan, South Korea, China and India, which together buy two-thirds of Iran’s oil exports and rely on EU companies to insure them. EU and U.S. sanctions aim to cut the oil revenues on which Tehran depends to force it to curb its nuclear program. The West suspects Iran’s aim is to develop nuclear weapons, while Tehran says it needs reactors to provide electricity.
Let’s gape at the oil pendulum
