KARACHI: The State Bank of Pakistan (SBP) has reported that country’s current account was in surplus despite remaining in deficit in January. The deficit in January stood at $126 million which substantially reduced the six-month surplus.
According to International Monetary Fund (IMF) forecast, Pakistan’s economy will probably expand 3.5 per cent in the 12 months ending on June 30, which is less than 4.3 per cent predicted by the government.
IMF analysts said the current account is in surplus due to direct impact of low trade deficit, especially 60 per cent increase in export of services.
During seven months of the previous year, there was a deficit of $2.792 billion in the current account deficit. Pakistan’s trade deficit in merchandise fell by over 12 per cent in the first seven months of the current fiscal year from a year ago as imports dropped while exports witnessed a paltry growth.
The trade deficit narrowed down to $11.617 billion in July-January period of the current fiscal year as against $13.209 billion over the corresponding period of last year, suggested data of the Pakistan Bureau of Statistics (PBS) released on Thursday.
Since October 2012, imports are steadily on decline while exports rebounded because of a slight surge in demand from recession-hit key markets of Europe and the US.
Experts said that despite disappointing economic indicators, current account with a surplus of $62 million at the end of January, the seventh month of the current fiscal year, kept hopes alive for survival.
The current fiscal year is facing many odds as foreign exchange reserves are declining fast, compared to previous year. It is a great help for the country that current account is still positive.
Aamir Aziz, a textile exporter, said although there was no hope for a boom in exports, low imports would reduce the trade deficit. Despite the fact that the current account was in surplus, exchange rate could not get strength and the rupee fell as low as Rs100 against the US dollar.
A currency expert said that flow of remittances, which is increasing each year, is the strongest supporter of local currency, but twice payments in February to IMF weakened market sentiments.
“The current account is in surplus despite no inflows from outside, but this surplus has a valid reason also. Pakistan received $688 million as Coalition Support Fund from US that improved the external account”, Atif Ahmed, a currency dealer in the inter-bank market.
He said if the country succeeds in maintaining a low trade deficit, the current account could be manageable at the end of this fiscal year.
The outflow in the coming months would be higher which would certainly bring deficit for the current account. The next payment of about SDR 256 million in the last week of the current month would hit the current account surplus and push it to deficit.