TUESDAY APRIL 19: July-March current account balance registers $99 million surplus

KARACHI: The country's current account balance has become positive, registering a surplus of $99 million in the first nine months of current fiscal year (2010-11), primarily driven by massive high inflows of remittances and exports. Economists said that surplus current account is a positive indication for the policy markers and it would put positive impact on economy.
"We believe that decline in the current account deficit would also help to keep the exchange rate stable, besides strengthening the foreign exchange reserves," said Muzzamil Aslam, an economist at JS Global. He said that the all-time high home remittances and exports inflows during March 2011 largely contributed to post a surplus current account. "With an increase of 26 percent, exports have reached $2.497 billion, and home remittances were $1.052 billion during last month", he said.
He said that oil prices in the world market are on surge but still not reflected in the trade account and is likely to disturb the current account balance in near future. "Therefore, we could say that current positive scenario will not persist". However, at present, when Pakistan is negotiating with International Monetary Fund (IMF), surplus current account balance is good news among several bad news including high fiscal deficit, he said. According to State Bank of Pakistan (SBP), the country's current account balance posted a surplus of $99 million in July-March of 2011 as compared to $3.1 billion deficit in corresponding period of last fiscal year. The account also posted a surplus of $347 million in March 2011.
Total deficit of trade, services and income stood at $11.412 billion during the first nine months of current fiscal year as against current account transfers of $11.561 billion, depicting a surplus of $99 million. During the current fiscal year for the second time the current account balance has become positive, as earlier in July-December of fiscal year 2011 it was surplus by $26 million.
The country's overall goods imports stood at $25.95 billion and exports at $17.945 billion with a trade deficit of $8.011 billion during first nine months of fiscal year 2011, which previously stood at $8.195 billion along with $14.348 billion exports and $22.543 billion imports during same period of last fiscal year 2010.
Services sector deficit declined by 36 percent to $1.23 billion with $4.2 billion exports and $5.4 billion imports in July-March of fiscal year 2011 as compared to a deficit of $1.93 billion with $5 billion imports and $3.1 billion export in corresponding period of last fiscal year. Similarly, income sector outflows stood at $2.6 billion and $494 million inflows during the period under review.
The State Bank has already predicted that current account deficit will be less than target and is likely to near about 2 percent of GDP at the end of current fiscal year. It may be mentioned that current account balance was posting deficit for a long time, largely contributed by high goods imports on the back of rising commodity prices on international front.