February 15, 2006	Wednesday	Muharram 16, 1427

KARACHI, Feb 14: During July-September 2005, Pakistanis travelling abroad spent $279 million, up from $236 million in a year-ago period, analysis of the balance of payments reveals. During fiscal year July-June 2004-05, they had spent $1.168 billion, slightly less than $1.198 billion in 2003-04.

Interestingly, out of $279 million spent on foreign tours in the first quarter of this fiscal year, $268 million were used for financing personal visits and $11 million on business tours. This showed the continuation of the trend as in the entire last fiscal year, $1.003 billion out of $1.168 billion went to finance personal visits and $165 million to business trips.

According to the Balance of Payments (BOP) statement compiled by the State Bank of Pakistan, the $279 million spent on foreign travelling, was part of the $1.916 billion spending in the services segment of the BOP. Earning under this section was $1.074 billion. So the country saw a services’ account deficit of $842 million in the first quarter of this fiscal year.

In the entire fiscal year 2004-05, the services sector had seen a huge deficit of $3.317 billion that had a bearing on the current account as well-and the country’s current account balance had shown a deficit of $1.559 billion, after posting a surplus of $1.811 billion a year earlier.

In the first quarter of this fiscal year, the $842 million services’ account deficit had a hand in increasing the current account deficit to $1.427 billion from just $403 million during the same period of the last fiscal year. Data on the current account of the two quarters of this fiscal year are out now but the item-wise details are not available.

During July-December 2005, Pakistan’s current account deficit stood at $2.903 billion and it occurred because of a huge services’ account deficit of $1.978 billion. How much of this deficit was caused because of the net spending on foreign tours would be known towards the end of March when the central bank would analyze the BOP in detail. But central bankers say that net spending on this account would be around $450-$500 million.

Net spending on foreign tours is worked out by subtracting the foreign exchange inflows on account of foreigners travelling to Pakistan. In the first quarter of this fiscal year, net outflow of foreign exchange on account of Pakistanis travelling abroad was $235 million. In the entire last fiscal year, net outflow of foreign

$279m spent on overseas tours exchange on this account was $993 million.

Financing of foreign tours of Pakistanis is not the only item in the services account of Pakistan’s balance of payments, there are 10 more items, some of them consuming larger amounts of foreign exchange, notably the country’s freight bill. But whereas the freight bill is directly linked with the growing external trade, the increase in the foreign exchange spent on financing personal overseas visits of Pakistanis is more indicative of the liberalization of foreign exchange rules, allowing increases in the official quotas of foreign exchange meant for this purpose.

This is an area where misuse of the facility cannot be ruled out-and as the country is now bracing for a big current account deficit, the central bank needs to keep a more vigilant eye on the outflow of foreign exchange in the name of overseas travelling. (The SBP says the current account deficit would reach $5.4 billion during this fiscal year, up from $1.6 billion last year.

This seems all the more important because some unscrupulous businessmen recently engaged themselves in marketing foreign real estate in Pakistan — and transferred abroad hundreds of millions of dollars.