Balance of payments deficit shrinks by 94%

The country’s balance of payments (BoP) deficit further shrank by 94 per cent to negative $1.267 billion in the first six months of the current fiscal year (2015-16) compared to negative $2.363 billion during the same period last year.

However, the country’s total Gross Domestic Product (GDP) stood at $147.580 billion in July-December 2015-16 compared to $135.228 billion during the same period last year, data released by State Bank of Pakistan revealed on Wednesday.

International Monetary Fund (IMF) has forecast Pakistan’s GDP growth at around 4.0-4.5 per cent in the current fiscal year owing to low prices of oil in the international market.

During last six months the country’s exports have been reduced by 14.40 per cent to $10.822 billion in the last six months (July-Dec) from $12.164 billion in the same period last year.

Meanwhile, the country’s imports after falling by 7.86 per cent stood at $22.246 billion in July-Dec this year compare to $24.145 billion in the same period last year.

Services sector’s export also declined by 5.3 per cent to $2.767 billion against its imports of $3.784 billion.

Overseas Pakistani workers remitted $9.736 billion in the first six months with a growth of 6.26 per cent compared with $9.162 billion received during the same period in the preceding year. During December 2015, the inflow of workers’ remittances amounted to $1.637 billion, which is 2.84 per cent higher compared with November 2015.

“IMF’s loans, country’s remittances and some cash crops have supported Pakistan’s economy in the last six months,” said an analyst of a brokerage house. “Otherwise, there is neither new industry set up nor any new investment received from abroad during the last few months,” he added. The foreign investors of Pakistani bourses are withdrawing their investment because of uncertainty in the local markets, he said.

A surplus in current account means savings exceeding investment while a low current account deficit means savings are marginally less than investment, the analyst said. A surplus or low deficit may not always be a sign of economic strength, he added.

He said that that Pakistan’s savings rate is not only low and stagnant but it is lower than its South Asian neighbours. Thus, a surplus or low current account deficit, by definition, suggests that Pakistan’s investment rate is also low and hence economic growth is not only low but it is stagnant as well.

Total investment declined by 50.2 per cent to $864 million during the period while direct investment increased by 2.2 per cent to $624 million in the last six months.