Current Account Deficit Drops By 2.6 Percent
Current Account Deficit Drops By 2.6 Percent: Current account deficit narrowed 2.6 percent to $3.665 billion in the first three months of the current fiscal year of 2018/19, the central bank’s data showed on Monday, as robust growth in remittances supported the economy with foreign exchange reserves having fallen to cover less than two months of imports and debts.
The State Bank of Pakistan’s (SBP) data showed that current account deficit amounted to $3.761 billion in the July-September period of the last fiscal year. Topline Research said the quarterly deficit was five-quarter low due to “13.1 percent year-on-year increase in remittances”.
Current account deficit also fell a massive 42 percent quarter-on-quarter as deficit in goods and services trade declined 10 percent and 46 percent, respectively. Remittances amounted to $5.42 billion in the quarter under review as against $4.79 billion in the corresponding period a year earlier.
In September, current account deficit, however, almost doubled to $952 million from $592 million in August, signaling a wakeup call for otherwise sanguine finance minister who forecast the annual current account deficit at below the FY17 level, which seemed much underestimated when compared with external financing requirement of $24 to 30 billion.
Finance minister Asad Umar predicted current account deficit at $12 billion for the current fiscal year, “signified by the drop to $1 billion in average current account deficit of last two months from $2 billion in the average of preceding three months”.
“Fundamentals are all moving in the right direction… the first quarter figures show healthy growth in exports; downside in imports and a jump of 13pc in remittances,” the minister said during a meeting at the Pakistan Stock Exchange over the weekend.
The current account deficit reached 5.7 percent of GDP or $18 billion for the last fiscal year compared to 4.1 percent or $12.6 billion a year earlier. The SBP projected the current account deficit for 2018/19 at around six percent on an expected rise in international oil prices.
“Exchange rate depreciation and other administrative measures, especially the increase in import duties, would help moderate growth in imports barring any major shock to international oil prices,” the SBP said in its latest report. In the July-September, the country’s imports were recorded at $13.8 billion, depicting an increase of six percent over the same period a year earlier.
“The growth in imports can be attributed to higher petroleum imports, where in the period Jul-Aug 2018, Pakistan imported $3.2 billion worth of petroleum products, up by a massive 52 percent year-on-year,” Topline Research said in a flash note. “We attribute this growth to rising international oil prices. Similarly in 1QFY19, exports rose by 3.6 percent year-on-year to $5.9 billion, which was due to higher textile and food exports.”
The Federal Board of Revenue recently issued a statutory regulatory order to impose regulatory duties on 570 items. The analysts said the impact of regulatory duties would be visible in reduction of imports in the coming months.
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