Services trade deficit narrows down by 10 percent

With the support of healthy rise in exports, the country''s services trade deficit shrunk by 10 percent to $239 million in the first month of current fiscal year. The sharp decline in the services sector deficit has also supported the country''s current account, which narrowed down by 88 percent in July 2011. Current account deficit stood at $75 million in the first month of fiscal year 2011-12 compared with $631 million deficit in corresponding period of last fiscal year.
The State Bank of Pakistan said on Saturday that the country''s services sector trade performance has been very encouraging in the first month of current fiscal year and services sector deficit, which was on surge during the last fiscal year, has reduced by 10 percent, or $25 million, during July 2011.
Services sector deficit declined to $239 million in July of current fiscal year as against $264 million in same period of last fiscal year. The detailed analysis showed that services sector imports continued to shrink and registered a decline of 7 percent or $44 million during the period under review. With current decline, overall services imports declined to $560 million in the first month of fiscal year 2012 compared with imports of $604 million in corresponding period of last fiscal year.
During the period, services sector exports posted a healthy growth of 23 percent or $69 million to $365 million from $296 million. "Although services deficit have witnessed a sharp decline in the initial month of current fiscal year, it can further reduce by some spots", economists said. Rising trend in export of services sector is a positive indication, they added.
They pointed out that high payments of transportation travel services, insurance, technical fees, royalties and government sector were major contributors in deficit and import of services. The country earned $139 million on account of transportation services, $29 million from travel, $14 million from communication, $2 million from construction services, $18 million through information technology, $4 million from insurance sector and $104 million on account of government services during July 2011.
On the other hand, transportation payments stood at $306 billion, travel $113 million, communication $8 million, construction $3 million, insurance $14 million, financial sector $8 million and computer and information services payments $13 million during the period. In addition, $8 million was paid on account of royalties and $32 million were paid for government services. It may be mentioned here that during the last fiscal year, the services trade deficit posted a notable increase of 27 percent or $457 million to $2.147 billion in FY11 compared with $1.69 billion in FY10. Services sector exports were stood at $5.473 billion and imports $7.62 billion in FY11.