Trade in services: absence of CSF inflows

Over the past 20 years, it is argued, that trade in services has become the most dynamic segment of global trade, growing more quickly than trade in goods. It is also plausibly argued that services are increasingly becoming "tradable" thanks to advancement in technology. In Pakistan, however, the situation in relation to trade in services is quite alarming. A glance on the data released by State Bank of Pakistan recently shows that trade in services has posted a $1.099 billion deficit during the first four months of current fiscal year compared to $714 million in the same period of FY 2015-16. Why is there such a sharp increase in deficit in trade in services this year-from July 1 to October 31, 2016? The most plausible answer to this question could be found in the absence of proceeds of Coalition Support Fund (CSF) as the country has not received even a single penny in this head from the Obama administration during this year so far. In the first four months of last fiscal year, however, the country had received some $713 million CSF inflows. The absence of CSF inflows has therefore principally contributed to a higher deficit in July-October trade in services.
This unsavory development has certainly set alarming bells for country's policymakers because the US' Afghan policy under the outgoing US administration has abundantly made it clear that Pakistan must not any CSF proceeds in its budget anymore. To add insult to injury, the election of Donald Trump as the US President does not augur well insofar as the question in relation to arrival of CSF proceeds in future is concerned.
The central bank's data also show that excluding CSF inflows, which were absolutely nil, all services trade exports fared better in July-October period than the first four months of the last fiscal year. An analysis of SBP data also shows that during the period under review services sector exports fell by 25 percent while imports by 5 percent as country's services sector exports stood at $1.613 billion in the first four months of this fiscal year against $2.140 billion in the same period of FY16, showing a decline of $527 million. Services sector imports reached $2.712 billion in July-October FY17 against $2.854 billion in the same period of FY16, showing a decline of $142 million.
During the period under review, the country earned $397 billion on account of transportation services, $96 million from travel, $286 million from communication, $27 million from construction, $23 million through financial services, $68 million from insurance sector and some $398 million on account of government services. Import payments, however, were the following: transportation $1.109 billion, travel $548 billion, telecommunication $137 million, financial sector $51 million, insurance $80 million, charges for use of intellectual propriety $89 million.
The situation with regard to trade in services should be a source of serious concern for the government especially as it obtains in the wake of declining exports of goods and remittances which are sourced to the decline in the international price of oil leading oil exporting countries, where there is a sizeable percentage of overseas Pakistanis, to expel foreign workers.