Current account deficit up by 59 percent in first half

The country's current account deficit sharply increased by 59 percent during the first half of this fiscal year, mainly due to rising goods import bill. Economists said foreign exchange earnings from exports and remittances are insufficient to offset a hefty rise in the import bill. They said the POL group, followed by machinery; metals and food groups contributed the most to the YoY increase in import payments.
The State Bank of Pakistan (SBP) Friday revealed that current account deficit sharply increased by 59 percent during the first half (July-Dec) of current fiscal year (FY18). The country's current balance posted a deficit of $7.413 billion in July-December of FY18 compared to $4.66 billion in the same period of last fiscal year (FY17), depicting an increase of $2.753 billion.
The detailed analysis shows that, during the period under review, cumulative deficit of goods, services and income surged by 21 percent. With current increase, combined deficit of goods, services and income surged to $19.36 billion in first half of this fiscal year compared to $16.016 billion in the same period of last fiscal year.
Economists said during the period under review against 18 percent growth in goods import, workers' remittances and exports posted 2.5 percent and 11 percent growth, respectively. In order to contain the rising current account deficit, some concrete measures are needed for achieving required growth in exports and home remittances to offset the rising import bill.
They said the federal government has already borrowed some $2.5 billion through the sale of Sukuk and Eurobond in the world market to build depleting foreign exchange reserves and support the external account.
According to SBP, with $26.094 billion imports and $11.776 billion exports, the country's goods deficit surged to $14.318 billion in July-December of FY18 against $11.342 billion in the corresponding period of last fiscal year. During the period under review, services trade deficit stood at $2.56 billion with $2.58 billion exports and $5.14 billion imports.
Similarly, deficit of income sector also witnessed an upward trend. Income sector deficit surged to $2.477 billion with $2.811 billion payments and $344 million receipts. Month-on-month basis, during December 2017, current account posted a $1.13 billion deficit against $1.44 billion in November 2017.

====================================================

Table 1.2: Key Macroeconomic Targets and Projections

====================================================

                         FY17                   FY18

====================================================

                                 Target4         SBP

                                         Projection2

====================================================

percent growth

----------------------------------------------------

Real GDP1                 5.3       6.0      5.0-6.0

CPI (average) 1           4.2       6.0      4.5-5.5

----------------------------------------------------

billion US$

----------------------------------------------------

Remittances 2            19.3      20.7    19.0-20.0

Exports (fob) 2          21.9      23.1    23.0-24.0

Imports (fob) 2          48.6      48.8    53.0-54.0

----------------------------------------------------

percent of GDP

----------------------------------------------------

Fiscal deficit 3          5.8       4.1      5.0-6.0

Current a/c deficit 2     4.1       2.6      4.0-5.0

====================================================