C/A deficit down, but better watch out crude

The latest current numbers are in, but the theme is the same. So far, the economy has managed to survive on the back of recovery in current account balance, partly led by the softening trade imbalance and the ever steady workers remittances. The question is how long will it continue?
After having grown better in each quarter since the start of last fiscal year, trade balance has started worsening again of late, despite the fact that exports have been gradually picking up amid hopes of further increases in the pre-Christmas season.
And there is no reason to wonder why. The price of global crude oil - Pakistans single largest import - has started soaring yet again as plenty of cheap government-funded money has found its way back into the commodities - enticed by initial, albeit possibly deceiving, signs of recovery in the global economy.
SBPs latest data shows just the same: October saw the external balance yawn by $531 million as against a current account surplus in the month before. Imports in October shot up to $2733 million compared to average $2476 in the first quarter, as global crude oil prices continued on its upward trajectory. And quite worrisomely, the commodity looks set to rise further, with prices averaging $72 per barrel in the month to date, as against $67 per barrel in the first quarter.
So the only savior has been the persistent rise in worker remittances - steadily cushioning the economy until now. Although, the recent initiatives to channel remittances through the right channel and into the right avenues - such as the proposed overseas Pakistanis fund - may keep this money flowing in, but it is unlikely that it would continue at the same rate.
The pace of growth in worker remittances has already started slowing, with average month-on-month growth in remittances easing to just 1 percent in the first four month of current fiscal year, compared to an average 4 percent in the last fiscal year.
Yet, even if commodity prices near its peak, the economy is not likely to face the same sort of crises witnessed last year, thanks to the IMF rescue package and other soft commitments, which can facilitate economic managers to run favourable policies including the phasing out of oil related subsidies, like it did last year.