April 9, 2006	Sunday	Rabi-ul-Awwal 10, 1427

KARACHI, April 8: Overseas travels of Pakistanis cost $701 million to the national exchequer during the first half (July-December) of the fiscal year 2005-06. Data obtained from the State Bank publication show that the country also received $91 million through foreigners visiting Pakistan during this period. So, net outflow of foreign exchange on account of overseas travels stood at $610 million during the first half of the current fiscal year. Indications are that spending on this net would not be less than $1.2 billion at the end of the financial year. And that would keep Pakistan’s balance of payments under pressure.

State Bank officials say people travelling abroad are allowed to take with them not more than $10,000 or equivalent amount in cash. Then there are various slabs of foreign travelling quotas in place depending upon the nature of the foreign trips. So, the more than $700 million spending on foreign tours in six months just reflects the amount consumed in this head and properly documented. Actual amount of foreign exchange flowing out of the country in the name of overseas travels must be much higher.

Financing of foreign tours had consumed $1.034 billion in the fiscal year (July-June) 2004-05. Even on net basis the spending was $993 million as the country had seen an inflow of $41 million through foreigners visiting Pakistan. Huge spending on foreign tours had an adverse impact on the balance of payments in the last fiscal year and it would have the same impact during this year also.

In the first eight months of this fiscal year i.e. between July 2005 and February 2006, Pakistan saw an overall balance of payments deficit of $458 million — thanks mainly to a big current account deficit of $3.668 billion. The current account deficit itself has stemmed from a fast rising trade gap.

The balance of payments position for July-March 2005-06 may be slightly better. The reason is that in March 2006, Pakistan raised $800 million from global debt market by launching a sovereign bond. It also received $500 million as part payment for PTCL from Etisalat — the UAE-based telecommunication company that has bought 26 per cent shares of PTCL for $2.6 billion. Etisalat made another part payment of $640 million in the first week of this month. That would reflect in the balance of payments of July-April 2005-06.

Despite huge inflows on account of privatization and also on account of foreign direct and portfolio investment, Pakistan is bound to see a $5.5-$6 billion current account deficit chiefly because of soaring trade deficit. Trade deficit stood $7.4 billion in eight months of this fiscal year as imports totalled $18 billion and exports stood at $10.6 billion. Even on the basis of free-on-board value of imports and exports (which is the way the trade deficit is reported on the balance of payments), the trade gap stood at $5.317 billion during the first eight months of this fiscal year.