July-Aug current account shows deficit of $394mArchive
KARACHI: The country’s current account witnessed a deficit of $394 million during the first two months of the current fiscal year despite higher reserves, ever-increasing remittances and low oil prices.
Though size of the deficit was much lower than the deficit noted in the first two months of the previous fiscal year, the continuation of deficit may be problematic once other factors, like remittances, do not remain supportive.
Compared to the deficit of $394 million during July-Aug period, there was a deficit of $1.456 billion during the same period of last year while the deficit was $2.627bn in the preceding fiscal year.
The low deficit may be a positive sign, but its persistence is negative, particularly in the wake of low oil prices. The oil import bill is the largest in the list of imports.
However, deficit was mainly on account of fall in exports in the first two months of this fiscal year.
According to the State Bank report, export of goods fell by 6.9 per cent to $3,538m during July-Aug period of 2015-16 from $3,799m in the same period last year.
During the same period of last fiscal year, exports fell by 9.6pc.
Similarly, services export fell to $940m from $1,051m, indicating poor performance of the export sector. It also shows that the country may not be able to reach the export target set for the first quarter of the current fiscal year.
Imports of goods during the two months fell by 16.5pc to $6.67bn from $8.02bn in the two months of the previous fiscal year. The services export also fell to $1,205m from $1,556m in the previous year.
The government has provided incentives to textile millers, including exporters, and for general exporters, local currency was devalued by 2.2pc and the exchange rate is being maintained at the current level of Rs104.40 in the inter-bank market.
However, cotton production suffered this year that may hurt export of textile-based products while exporters are complaining that China and India are more competitive in the global market due to cheaper products.
Pakistan had earlier been earning $2bn to $2.5bn from export of rice, but for the last two years, rice export suffered heavily due to rice exports from Far-Eastern countries, particularly from Vietnam, in the global rice markets.
Published in Dawn, September 19th, 2015
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