C/A deficit widens to $14 billion mark in 10 months

With massive goods import bill, the country's current account deficit widened to $14 billion mark in the first ten months of this fiscal year (FY18). The external account alone posted near about some 2 billion dollar current account deficit in April 2018. The current account deficit in first 10 moths of this fiscal year is even higher than commutative deficit of last fiscal year (FY 17), in which the country posted &12.62 billion.
Economists said the rising goods import bill, particularly CPEC related, have largely contributed in the soaring current account deficit. They said current trend of external account is not surprising since it was already estimated that the country will miss current account target during this fiscal year. As per State Bank of Pakistan (SBP) estimates, current account deficit will be 4 to 5 percent of GDP by end of this fiscal year as against target of 2.6 percent.
State Bank on Friday reported that the country's external account continues to deteriorate and current account deficit posted an increase of 50 percent during the first ten months of this fiscal year as it surged to $14.035 billion mark in July-April of FY18 compared to $9.354 billion in the same period last year (FY17), depicting an increase of $4.68 billion.
The detailed analysis showed that during the period under review, cumulative deficit of goods, service and income was surged by 19 percent or $5.443 billion. With current increase, combined deficit of goods, services and income reached $33.421 billion in first ten months of this fiscal year compared to $27.97 billion in same period of last fiscal year.
Month-on-month basis, the current account posted a massive deficit of some $2 billion alone in April. The current account deficit was hiked by 61 percent to $1.955 billion in April 2018 as compared to $1.214 billion in March 2018. As arrived external inflows were insufficient, financing of current account deficit and payments of external debt obligations were made from the foreign exchange reserves, which reduced to $17 billion in May 2018 down from $21.3 billion in June 2017.
The country has also borrowed some $1 billion from a Chinese bank in April to reduce pressure on foreign exchange reserves; however, the entire borrowed amount was utilized in a month for foreign debt obligations. Earlier, Pakistan floated Eurobond and Sukuk worth $2.5 billion in December 2017. Some $1.5 billion was raised through sale of Euro Bonds and an amount of $1 billion through Sukuk to build the depleting foreign exchange reserves.
According to SBP, with $45.56 billion imports and $20.558 billion exports, the country's goods deficit surged to $25 billion in July-April of FY18 as against $20.77 billion trade deficit in corresponding period of last fiscal year. Similarly, deficit of income sector also witnessed upward trend. Income sector deficit surged to $4.203 billion with $4.799 billion payments and $596 million receipts.