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Services balance posted a significant improvement during the initial months of the current fiscal year supported by arrival of Coalition Support Fund (CSF) inflows and lower import bill. Services trade deficit declined sharply by 45 percent during the first five months (July-November) of this fiscal year (FY16). Services trade registered a deficit amounting to $688 million in the first five months of FY16 compared to $1.264 billion in the corresponding period of last fiscal year, depicting a decline of $576 million.
Economists said the CSF inflows have become an important component of the services trade sector and largely contribute to lower services deficit. The said that Pakistan received steady CSF inflows amounting to $713 million during the period under review and aside from the CSF inflows, Pakistan's deficit in the services account continued to widen.
The higher CSF inflows have helped build Pakistan's foreign exchange reserves that presently stand nearly $21 billion mark. A detailed analysis revealed that during the period under review, services exports posted a slight decline of 3 percent or $74 million. Services exports stood at $2.388 billion in the first five months of this fiscal year against $2.462 billion in the same period of last fiscal year.
Services sector imports also witnessed a downward trend and fell by 17 percent. Overall, services imports stood at $3.076 billion in FY16 compared to $3.709 billion in the corresponding period of FY15, depicting a decline of $633 million. On the import side, transport is the largest component that contributed over $843 million deficit in the services balance. During the period under review, transport import stood at $1.243 billion against exports earnings of $400 million.
Furthermore, travel related deficit is second largest component in the import category as more Pakistanis are travelling abroad only if foreigners were also visiting Pakistan in a similar manner, this deficit could have been much contained. The country earned $110 million on account of travel, $294 million from telecommunication, $11 million from construction, $15 million through insurance and pension services, $38 million from financial and some $1.11 billion on account of government services during first five months of FY16.
Travel payments stood at $604 million, telecommunication $172 million, construction $4 million, insurance $102 million, financial sector $63 million, government services $187 million and charges for use of intellectual property rights stood at $70 million during the period under review. Month-on-month basis, during November 2015, services posted a deficit of $287 million with $600 million imports and $313 million exports.

Copyright Business Recorder, 2016

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