July-November current account deficit at $2.1 billion

RIZWAN BHATTI

KARACHI: The country's current account deficit has registered a notable increase of 257 percent to $2 billion during first five months of current fiscal year (2011-12), primarily driven by high deficit of trade and services sectors, the SBP said.

The SBP on Friday revealed that current account balance, which was surplus during the last fiscal year, is again on surge and posted a deficit of $2.1 billion during July-Nov FY12 as compared to $589 million in the corresponding period of FY1l, depicting an increase of $1.515 billion. Economists believe that rise in current account deficit is not a positive indication for the country's economy as it would directly hurt the country's forex reserves.

"The massive increase in current account deficit is alarming and if deficit of goods and services sector is not controlled, Pakistan may see forex reserves slipping," they added.

They recalled that in November 2009, due to rising current account deficit, Pakistan was compelled to rejoin the International Monetary Fund and get a loan of $11.3 billion under Stand by Arrangement (SBA) to avoid default on international front. Although, the programme was not completed and some tranches were not released by the Fund because of some policy differences, the loan helped Pakistan maintain foreign exchange reserves. They said massive increase in import of trade goods and services sector is the chief reason for big increase in current account deficit. Despite some growth in workers remittances the overall current account deficit in on surge.

The State Bank statistics showed that cumulative deficit of goods, service and income has mounted by 28 percent or $1.95 billion to $8.88 billion in first five months of current fiscal year against a deficit of $6.92 billion in the same period of last fiscal year. Major growth has been witnessed in goods deficit and the country's overall goods imports stood at $16.49 billion while exports at $10 billion with trade deficit of $6.42 billion during July-Nov of FY12. Previously, the deficit was recorded at $4.65 billion in same period of FY11, depicting an increase of $1.77 billion.

During the period under review, with 18 percent or $182 million increase, the deficit of services sector has reached $1.16 billion from $984 million. Similarly, income sector deficit stood at $1.293 billion with $1.673 million payments and $380 million income during the first five months of current fiscal year.