KARACHI, Sept 3: Pakistanis travelling abroad during July-June 2004-05 spent $993 million, down from $1.034 billion a year earlier, analysis of the country’s balance of payments for the last fiscal year shows. What is particularly intriguing about this huge spending is that in both fiscal years, business tours consumed much less foreign exchange than personal tours, statistics obtained from the State Bank documents reveal. In fiscal year 2005, personal tours ate up $832 million worth of foreign exchange whereas business tours consumed only $161 million. This was in line with the trend seen a year earlier with the difference that the share of business travelling rose significantly though it still formed the smaller part of the expenses on overall foreign travelling. In fiscal year 2005, Pakistan had to finance $980 million personal foreign travelling expenses whereas the amount spent on financing business travels was $54 million.
The net amount of foreign exchange spent on overseas travelling mentioned earlier, forms part of the services’ account in the BOP. So, the services’ account deficit of $3.317 billion in the last fiscal year had a component of $993 million net outflow in the shape of foreign travelling. In FY04, the net outflow of $1.034 billion through foreign travels made up a much larger part of that year’s services’ account deficit of $1.316 billion.
So, one way for looking at the issue could be that the services sector deficit is becoming less vulnerable to foreign travelling expenses. But the fact that foreign travelling is eating up close to a billion dollar a year should be examined carefully and the policy makers must see to it if foreign travelling is being misused as a conduit for the flight of capital.
The State Bank’s liberalization of foreign exchange rules in the last two years has sent a signal to the rest of the world that Pakistan’s forex regime is opening up much faster than in several other countries in the region. But the central bank must ensure that this fast-paced liberalization does not encourage currency smuggling and flight of capital from the country.
This has become all the more necessary in the changed external sector scenario. The balance of payments position of Pakistan, as also of other growing economies, is bound to deteriorate during this fiscal year as international oil prices continue moving up.
Bankers and executives of exchange companies attribute unusually large net outflows on account of personal travels what they call disguised flight of capital. This was in addition to the real flight of capital, estimated worth far higher the amount spent on foreign travelling.
Part of the blame can be laid at the doors of a few filthily rich businessmen who were marketing, and still continue to market, foreign real estate in the local markets. The foreign pieces of land and housing units thus being sold in the country are resulting in big outflows of foreign exchange from Pakistan -— part of which has never been documented —- thanks to the weaknesses of the system.
