Economic managers might be sighing in relief as the country’s macroeconomic indicators show an overall improvement, with the current account deficit having set at 1.1 percent of the gross domestic product (GDP) during 11 months of the outgoing fiscal year 2013-14.
The inflow of dollars, in resource-constrained Pakistan, due to foreign investment, workers’ remittances and international disbursements is also encouraging.
The State Bank of Pakistan (SBP) reported on Thursday that during July-MayFY2014 the country’s current account balance stood at $2.577 billion compared to $2.157 billion in the corresponding period of FY2013.
Viewed as manageable by economic observers, the deficit marks the ever-widening trade gap as the only head on the current account list that depicts a negative trend.
The country’s balance of trade in goods and services registered a deficit of $1.65 billion to stand at $17.09 billion against last year’s $15.44 billion.
The deficit in goods’ trade amounted to $14.93 billion against $14.03 billion, the country’s trade gap in services trade accumulated to $2.16 billion compared to FY2013’s $1.41 billion.
During the review period, Pakistanis working abroad remitted $14.33 billion against $12.75 billion in the last fiscal year.
Debtors and donors abroad disbursed $3.67 billion, rising up by $1.42 billion from $2.24 billion the country received in the July-MayFY2013.
The State Bank has said that total long- and the short-term inflows increased from $1.98 billion to $2.91 billion and from $256 million to $757 million, respectively.
The heavily-indebted country repaid $2.69 billion to its lenders compared to $2.13 billion in FY2013.
During the week ending on June 13, the SBP made official payments of $18 million from its reserves.
Analysts foresee the FY2014’s current account deficit equating, or slightly exceeding, the FY2013 level of $2.49 billion. The country has braved a deficit of $4.65 billion in FY2012.
A quarterly breakup of FY14 shows that the deficit accounted for $1.26 billion during July-September 2013, $647 million during October-December 2013 and $404 million during January-March 2014.
The deficit in the first two months of the outgoing fourth quarter, April and May, stood at $111 million and $147 million with June still to go.
Overall, the analysts see the country’s macroeconomic indicators improving, though slowly.
INVESTORS COMING TO PAKISTAN AGAIN: The pro-business Pakistan Muslim League-Nawaz (PML-N) government is perceived to have restored investors’ confidence in the country.
It is for this reason that the country’s foreign exchange reserves, which had depleted to a historic low, have shot up to $13.57 billion as of June 2013. Of this total, the State Bank holds $8.669 billion.
“The increase in the central bank reserves is primarily due to multilateral, bilateral and other official receipts amounting to $24.0 million,” said the State Bank on Thursday.
The inflow of foreign investment, which analysts propose as an ultimate remedy for the dollar-hungry country’s financial woes, swelled by 159 percent ($2.28 billion to $3.711 billion) compared to FY2013’s $1.43 billion.
FOREIGN DIRECT INVESTMENT CLIMBS BY 2.5 PERCENT: According to the central bank, in July-May FY2014 the all-important Foreign Direct Investment (FDI) climbed by $ 34 million or 2.5 percent to $1.361 billion from $1.328 billion in the previous year.
Irfan Saeed, an analyst at InvestCap Research, cites the receipt of $537 million from China Mobile on account of 3G/4G auction as the primary reason behind the “meager” escalation in FDI.
The inflow of private and public portfolio investment into the country’s booming stock markets showed a positive trend, respectively by 133 percent and 42,758 percent to $227 million and $2.122 billion from $97.4 million and a meager $5 million the country had received in FY2013.
FY2014 would be the year seeing the total annual foreign investment figures cross the $3 billion mark after five long years, said Irfan.
Offshore investors had invested $2.66 billion in FY2009, $2.08 billion in FY2010, $1.97 billion in FY2011, $707.8 million in FY2012 and $1.58 billion in FY2013.
Regarding the future, Irfan sees political stability and the ongoing military operation as most vital factors for determining FDI inflows in Pakistan.
“Stability on the political front would provide a room for FDI growth,” the analyst viewed.
The analyst predicted that in case the above mentioned issues are not resolved properly, the FDI would remain depressed.
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