The analysts foresee the economic managers seeking a fresh bailout loan package from the International Monetary Fund (IMF) as the country’s external account keeps showing worrisome deterioration for first 10 months of the current fiscal year, FY2011-12.
The central bank reported Thursday that the country’s current account deficit widened to 1.7 percent of the GDP, accounting for $ 3.394 billion, during July-AprilFY12 against a surplus of $ 466 million or during the corresponding period last year.
The economic observers believe that pressure on the external account was due to large external debt payment and increased current account deficit and the suspended aid and assistance from international donors.
Pakistan’s negative trade with the world appears to be a major reason for the widening of the current account as gap between the country’s exports and imports increased by $4.184 billion to $ 12.683 billion compared to last year’s $ 8.499 billion.
During the review period the exports were recorded at $ 20.474 billion, upping marginally by $ 14 million against $ 20.460 billion of July-AprilFY11.
The growth in the imports, however, remained robust and ballooned to $ 33.157 billion from $ 28.959 billion of same period in FY11 despite lower aggregate demand at home.
The central bank data show that during July-AprilFY12 foreign investment in the country nosedived by a huge 65 percent to a meager $ 563.3 million, depicting a sharp slump of over $ 1.031 billion compared to $ 1.595 billion invested by the foreigners during same months in FY11.
The disbursements by the donors and loaners abroad also set in the red zone contracting to long-term loans worth $ 1.588 billion against $ 1.674 billion of last year.
Of the total amount disbursed to Pakistan, during the review months, $ 1.510 billion came as a project loan and $ 78 million as a program loan. The short-term receipts, including commercial loans and those coming from Islamic Development Bank, remained zero.
“(The) current account deficit is expected to remain in the range of $ 4-4.5 billion versus $3.5-4 billion expected in FY12,” viewed analysts at Topline Research. In percentage terms these estimates are 1.6 to 1.8 percent and 1.5 to 1.7 percent of the Gross Domestic Product.
The financing of such a huge deficit, the analysts believe, would remain a major challenge for the cash-strapped government, especially given the current poor state of foreign inflows.
The analysts said an under-pressure external account, coupled with government’s ever-increasing budgetary borrowings, would compel the State Bank to maintain the 12 percent interest rate intact even in FY13. The Pak Rupee would keep feeling the heat of a weaker external account throughout next fiscal year.
On SBP’s Balance of Payment list worker remittances appear to be the only comfort zone for the economic mangers.
The central bank counted receipts from overseas Pakistanis higher by $ 1.831 billion at $ 10.877 billion during the first 10 months. This shows over 20 percent growth over same period of FY11 when Pakistani compatriots had remitted $ 9.046 billion.
Having peaked to a record $ 11 billion last year, the analysts forecast the remittances to cross the $ 14 billion mark in next financial year.
“Comfort to external account would likely come from workers’ remittance that is expected to cross $14 billion in FY13,” said the analysts.
The economic observers expect some respite coming from a possible dip in international oil prices, improved foreign inflows, materialization of the Coalition Support Fund and 3G auction licenses and the government’s decision to re-enter the fresh IMF program.
“Re-entry into IMF program to avert external account crisis,” is the option widely being foreseen by the analysts in the current scenario.
