US war reimbursements keep Pakistan’s external account in check


The country’s current account balance after braving a whole year of deficits in FY12 is moving ahead in the green zone marking a $ 432 million surplus during the first quarter on the back of, what the official and unofficial quarters agree, receipts of war reimbursements from the United States in early August.
However, a monthly account of Pakistan’s Balance of Payment shows a negative trend as the month of September marked a deficit of $ 331 million against $ 1.084 billion surplus in August, the month during which the Americans had reimbursed the war expenses.
Washington, Islamabad’s non-Nato ally, had released to the dollar-hungry Pakistan on August 1 some $1.118 billion under the long-denied Coalition Support Fund (CSF) after a months-long strain in bilateral ties relaxed through an on-and-off process of negotiations between the two countries on civilian, military and intelligence level.
The inflows, the SBP chief spokesman Syed Wasimuddin had confirmed, had put the country’s current account balance into a surplus of $ 919 million during the first two months of FY13, July-August.
Quarter-wise, the central bank reported the surplus ballooned to $ 432 million during July-September against a deficit of $ 1.339 billion the cash-strapped country had faced during the corresponding months in FY12.
In percentage terms, the surplus constitutes a negligible 0.7 percent of the country’s gross domestic product (GDP) accounting for $ 61.674billion.
Senior analysts like Khurram Schehzad had also seconded the central bank’s view saying the positive was attributable mainly to the dollar inflows on account of CSF and Kerry Lugar from the US.
The receipts under KLA have been meager with Washington reported to have transferred only Rs 20.356 billion during FY12 against a projected receipt of Rs 34.164 billion. Under the KLA, Pakistan has the US’s word for receiving a civilian aid of $ 7.5 billion till 2014, $ 1.5 billion per annum.
However, the funds transfer under CSF augured well for the funds-starved Pakistan which, in FY12, had braved a current account deficit of over $ 4 billion, pushing the economic managers closer once again to a fresh IMF bailout package.
The country’s trade balance also showed a restraint and widened to $ 3.634 billion compared to the corresponding quarter of FY12 which had seen the same head increasing beyond $ 4.15 billion.
A break up of trade deficit depicts that during the quarter in review the country exported goods worth $ 5.994 billion compared to $ 6.142 billion in July-Sep of the last fiscal. Compared with last year’s $10.300 billion, the imports totaled at $ 9.628 billion.
Oversea Pakistanis continue to do well by sending back home $ 3.599 billion during the review period as against $ 3.297 billion of last year.
The central bank says that the country on average receives over a billion dollars every month from Pakistani compatriots. The disbursements from the foreign financers, another noteworthy indicator on the current account balance list, set in the red zone and remained confined to long-term project loans totaling at $ 355 million. Last year, the foreign disbursements under the same head had amounted to $ 372 million.
The C/A surplus also reflected well on the country’s booming stock market where, despite investors’ concern for an uncertain law and order situation in the protests-hit city, the benchmark KSE 100-share index closed bullish on Friday, last trading day of the week.
The equity investors showed an across-the-board interest in stocks owing to the country’s current account witnessing a surplus for first quarter of the current fiscal year, said Ahsen Mehanti, a senior equity analyst and director at Arif Habib Securities.
However, despite these positives the economic managers have still a lot ot worry about owing to the country’s falling foreign exchange reserves that now have contracted to $ 14.31 billion, of which only $ 9.8 billion belong to the State Bank. The remaining $ 4.5 billion are owned by the commercial banks.