Service deficit rises to $1.7 billion

The country's services sector trade posted a deficit of 1.7 billion dollars, up 21 percent, during the eleven months of current fiscal year, mainly due to high imports and slowdown in exports. The State Bank of Pakistan has stated that services sector trade statistics are again deteriorating and deficit of services trade, which was on decline till April, has registered an increase of $297 million during July-May of fiscal year 2010-11.
According to the SBP, services sector deficit surged by 20.75 percent, to $1.728 billion, during July-May of fiscal year 2010-11 compared with $1.421 billion of corresponding period of fiscal year 2009-10. Till April 2011, the country's services trade deficit was on decline and had, impact, shrunk by 28 percent, to $1.4 billion, in ten months (July-April) of 2011.
Detailed analysis showed that services sector export continued to grow and crossed $5 billion mark in eleven months of current fiscal year. With a slight increase of 4 percent, or $188 million, the services sector exports stood at $5.016 billion in July-May 2011 compared with $4.828 billion in same period of fiscal year 2009-10.
However, services sector imports also registered an increase of 8 percent during the period under review. With current surge, overall services imports reached $6.744 billion in eleven months of current fiscal year compared with imports of $6.259 billion, depicting an increase of $485 million. Analysts said that a massive increase of over 20 percent in services deficit during eleven months is a matter of concern, and policy makers should develop a long-term policy to curtail higher deficit of services sector. They said that high payments on account of government service, transportation, travel and information technology are responsible for rising services trade deficit.
"Although services exports have witnessed some increase, but we believe that it is not sustainable and in the future it may decline" they added. Month on month basis, services deficit in May 2011 stood at $312 million with $355 million exports and $667million imports. During May 2011 exports declined by $732 million to $355 million from $1.087 billion, while imports surged by 14 percent to $667 million in May 2011 compared with $581 million in May 2010.
The country earned $1.297 billion on account of transportation services, $318 million from travel, $206 million from communication, $16.42million from construction services and $2.21 billion on account of government services during July-May of fiscal year 2010-11. On the other hand transportation payments stood at $3.577 billion, travel $875 million, communication $159 million, construction $25 million, insurance $137 million, financial sector $99 million and computer and information sector payments $151 million during the period. In addition, some $106 million was paid on account of royalties and $555million was paid for government services.