The country's services trade deficit continued to witness a rising trend crossing $2 billion mark, or widening by 124 percent, during the first 10 months of the current fiscal year over the same period last year. Economists said higher services deficit will directly hit the current account balance, which is already facing a higher deficit and consuming millions of dollars of the country's forex reserves.
"A massive increase in services trade deficit is a matter of concern for the policymakers and we believed that there is need for developing a long-term policy to curtail the rising deficit of services trade," they added. During the last fiscal year, the country's service trade presented an improved picture with higher exports mainly due to release of much awaited Coalition Support Fund (CSF) payments. However, this year service sector performance is deteriorating following the delay in CSF inflows.
They said on Saturday, the US made another payment of $370 million to Pakistan on account of CSF and with the arrival of these inflows trade deficit of services sector will reduce in coming days. Economists said that high payments on account of government service, transportation, travel and information technology are responsible for a massive increase in services trade deficit.
According to the State Bank of Pakistan services sector trade statistics continued to deteriorate as services trade deficit surged to $2.267 billion in July-April of FY14 against $1.013 billion in the corresponding period, depicting an increase of 124 percent or $1.254 billion.
The detailed analysis revealed that both components of services trade, including exports and imports continued to decline. Although the decline in imports is a positive sign, however continued decline in exports is not a good indication and needs some steps to push the exports up. During the period under review, exports of services trade registered a decline of 28 percent. The services sector exports fell to $4.186 billion in first 10 months of this fiscal year compared to $5.853 billion in the same period of last fiscal year, showing a decline of $1.667 billion
Services sector imports plunged by 6 percent or $413 million to $6.453 billion during July-April of FY14 against imports of $6.866 billion in the same period of FY13. Month-on-month basis, services deficit in April 2014 stood at $248 million with $452 million exports and $700 million imports.