KARACHI: Pakistan's service trade deficit shrank 43 percent during the last fiscal year (FY21) mainly due to lower international travel payments in wake of Covid-19 pandemic.
According to State Bank of Pakistan (SBP), services trade posted a $1.875 billion deficit during FY21 compared to $3.316 billion in FY20, depicting a decline of $1.441 billion. The lower services trade deficit has helped to contain the current account deficit, which fell 58 percent to $1.8 billion during the last fiscal year.
The improvement in services trade came from imports as well as from exports as the import payment fell by 11 percent, while exports receipts recorded 9.19 percent growth during July-June FY21.
The detailed analysis revealed that during the period under review exports of services trade increased by $500 million to $5.937 billion. Imports stood at $7.812 billion, down by $941 million.
The massive fall in services import payment is mainly driven by imports under two categories, which are linked with international air travel and deeply impacted by the Covid-19 pandemic.
A notable reduction in payments for air transport services imports is the primary factor behind the improvement in the overall services account. Payments under the travel category reduced by 33 percent to $825 million in FY21. Travel category basically represent the purchase of the air tickets of foreign airlines by Pakistani residents and the worldwide travelling was reduced due to travel restrictions in wake of the pandemic.
Another category, where payments fell, is financial services, which are mainly required by Pakistani residents during international travel. Payments under financial services declined from $468 million in FY20 to $185 million in FY21. In addition, freight import payments decreased slightly down by $87 million to $2.949 billion in FY21.
On the services export front, the information and communication technology sector recorded a healthy 47 percent growth in receipts, which reached $2.123 billion during the July-June FY21 as against $1.440 billion in the same period of FY21.
The country's IT services firms have taken full advantage of explosive growth in IT services demand into the global market due to Covid-19 Pandemic. However, the encouraging information and communication technology exports were almost completely offset by a weakening in receipts from other services sector including the local shipping companies. Other major services trade exports were $1.421 billion of other business services and $1.037 billion of government services.
Copyright Business Recorder, 2021