KARACHI, April 6: Pakistan’s current account deficit, which stood at $886 million during July-December last year, rose to $1.114 billion in February this year, showing an increase of $228 million within two months. The trade deficit, which was around $2.257 billion during July-December 2004, shot up to $3.019 billion in February 2005, showing a rise of $762 million in just two months, according to a provisional data released by the State Bank.
Imports during July-February 2004-05 stood at $12.242 billion whereas exports totalled $9.223 billion. Both values have been worked out on free-on-board or fob prices.
The item-wise break-up of imports in July-February 2004-05 is not available, but the trend noted during July-December 2004 suggests that an increase, both in volumes and prices of oil, should have been a key reason for an expansion in trade deficit. The $3.019 billion trade deficit in eight months of this fiscal year is more than five times the deficit seen in a year-ago period: it is more than double the trade deficit of $1.279 billion in the entire last fiscal year.
During July-December 2004, $1.87 billion import bill of petroleum and petroleum products was up 38 per cent from the same period in the last fiscal year. The bill for July-February must have risen at a faster due to an increase in the international prices of petroleum and its products in January-February 2005.
The $1.114 billion current account deficit recorded in eight months of this fiscal year has come in a sharp contrast to $1.99 billion surplus seen during the same period last year. The deficit seems set to widen further as imports are growing much faster than exports, thus increasing the trade gap.
In its second quarterly report released last month, the State Bank said Pakistan’s trade deficit might reach $5 billion, up from the original $3 billion. It said whereas exports are likely to reach $13.5 billion, short of an original target of $13.7 billion, imports may shot up to $18.5 billion, against the initial target of $16.7 billion.
As oil prices continue to rise in the international market and as demand for petroleum and its products also keep rising at the same time, inflated oil import bill would be the main contributor to increase in overall import bill. During the first half of the current fiscal year, the import of oil in terms of quantity was 20.6 per cent higher than in a year-ago period.
But imports are likely to reach $18.5 billion, up from initially estimated $16.7 billion not only because of higher oil import bill but also because of increased import bill for machinery, food, fertilizers and other chemicals and metals, including iron and steel whose prices have also been on the rise in the international market.
An across-the-board increase in import of almost all items points to the fact that Pakistan’s economy is progressing. What else is encouraging is that it is not only ordinary imports that have pushed up import bill so far during this fiscal year -— there are some extraordinary one-time imports as well e.g. payment of more than $300 million by the PIA on import of aircraft and $325 million by the Port Qasim on import of a dredger.
The SBP data show that where trade deficit soared to $3.019 billion in eight months of this fiscal year from just $536 million in a year-ago period, the deficit on trade and services account shot up to 5.123bn from only $1.135 billion. The services deficit can be attributed chiefly to increased charges on shipment of exports.
On the other hand, foreign exchange sent home by overseas Pakistanis totalled $2.606 billion in eight months of this fiscal year, up from $2.546 billion in the same period of last fiscal year. Similarly, the amount of foreign currency deposits held by those residing in Pakistan went up to $565 million from $438 million.
