Current account deficit firmly pushed in the red

Having stayed in the green for the first half of FY13, the current account has firmly been pushed in the red, with deficit crossing the billion dollar mark. The State Bank of Pakistan (SBP) released the BoP statistics, showing a sharp surge in current account deficit in March. The current account deficit of $513 million in March alone equalled the CA deficit recorded in the first 8MFY13.
That said, comparison with the previous year numbers paints a rosy picture, as the deficit is three times lesser than the corresponding period last year. Recall that the CA deficit by the end of 8MFY13 had gone up to $700 million, but post date revision in the provisional numbers for February, mainly in the trade account, from $596 million to $387 million, resulted in a much improved 9MFY13 number.
The strong CSF flows of nearly $1.8 billion in the ongoing fiscal year had kept the current account in surplus for the first half, but the lack of any significant improvement in other major drivers, has pushed the current account back in deficit.
The trade balance has improved ever so slightly with the trade deficit reducing by nearly five percent year-on-year. However, the performance on exports front is alarming as exports remained stagnant in comparison to last year. There lies a huge question mark over Pakistans chances to be any close to meet the annual export target in FY13.
Workers remittances continue to provide strong support to the current account; however the rate of increase has subsided to an extent. Remittances in the 9MFY13 period grew by six percent year-on-year, as overseas Pakistanis sent over $1.1 billion in March, well in line with the year-to-date average monthly remittances.
Save for the CSF inflow, there is nothing to rejoice about the current account situation, except the steady stream of remittances. With the country likely to miss the cotton production target and energy crisis worsening by the day, exports might face more pressure in the coming months. From what it appears, it is going to be tricky for Pakistan to keep the current account deficit in check in the absence of major inflows in the near future.