09 November 2004	Tuesday	25 Ramazan 1425

KARACHI, Nov 8: Pakistan's current account surplus fell to $100 million in the first quarter of this fiscal year, from $1.117 billion in a year-ago period.

According to the data released by the State Bank, the current account surplus declined in July-September 2004 chiefly due to a huge trade deficit of $747 million (based on the free-on-board or fob value of imports and exports. In the comparable period of the last year the trade deficit stood at just $2 million.

The country also booked a huge services deficit of $618 million in the first quarter of this fiscal year. In the comparable period of the last fiscal year it had posted a surplus of $53 million. So, the deficit in trade and services accounts stood at $1.365 billion in July-September 2004, against a surplus of $51 million in July-September 2003.

Investment income outflows totalled $607 million in the first quarter of this fiscal year including interest payments of $225 million on foreign exchange liabilities, against inflows of $56 million. This left the income account in a deficit of $551 million. In the first quarter of the last fiscal year, investment income outflows stood at $448 million including interest payments of $213 million on foreign exchange liabilities against inflows of $37 million. This had left the income account in a deficit of $411 million.

Thus, the combined deficit on goods, services and income accounts shot up to $1.916 billion in the first quarter of the current fiscal year, more than five times the deficit of $360 million in a year-ago period.

The trade deficit of $747 million in July-September 2004 was the difference between the fob imports of $4.177 billion and fob exports of $3.430 billion. In July-September 2004, fob imports stood at $3.039 billion and fob exports at $3.037 billion, thus keeping the trade deficit at only $2 million.

On services account, Pakistan pays $1.458 billion for such services as chartering vessels for transporting its external trade, financing travelling abroad of its citizens and such other services in July-September 2004. On the other hand, it earned $840 million on services account that included official receipts from foreign governments and interest on reserves, etc.

On the income account, the outflows represent repatriation abroad of the profits earned by multinationals operating in Pakistan plus transfers abroad of the dividends declared by them.

These also include the purchase of crude oil from foreign oil companies engaged in oil extraction here.

The current account surplus fell sharply in the first quarter of this fiscal year despite an increase in current transfers that totalled $2.045 billion, up from $1.489 billion in a year-ago period. Current account transfers improved due to an increase in workers remittances or foreign exchange sent back home by overseas Pakistanis as well as resident foreign currency accounts.

In July-September 2004, workers remittances totalled $983 million and resident foreign currency accounts swelled by $163 million. In July-September 2003, workers remittances totalled $906 million and resident foreign currency accounts had gone up by $45 million.

Whereas the increase in workers remittances show a higher confidence of expatriate Pakistanis in their home economy and has been a result of narrowing gap between the inter-bank and open market exchange rates, the increase in resident foreign currency accounts indicates that the dollarization trend is setting in. The rupee lost 1.9 per cent value in the first quarter of this fiscal year providing justification for expansion in these accounts. The volume of these accounts rose to $2.503 billion at end-September from $2.340 billion.