KARACHI, Jan 10: The current account deficit has gone up by 22 per cent during the first five months of the year while the pressure is mounting with rapid increase in trade deficit.

The State Bank issued latest data about the current account deficits during July-November, which reached a total $3.753 billion. The deficit shows the gap between inflows and outflows of the foreign exchange.

The country had witnessed a deficit of $3.068 billion during the same period last year, which means that the latest deficit rose by 22.32 per cent.

The rising current account deficit is largely led by the widening trade deficit, which widened to $6.45 billion during July-December 2006, 15 per cent higher than the same period of last year.

The widening current account deficits have been the real source of concern for the government, which financed the gap by selling its assets, workers’ remittances and the inflows coming as foreign investment.

The government expects to receive $5.5 to $6 billion as workers, remittances during the current fiscal while the inflows have already gone up by 20 per cent. It also expects to receive $3 billion as foreign direct investment (FDI) during the same period.

Analysts said that all these resources, which help the government to bridge the gap of current account, were not sustainable and this was the real threat.

State Bank Governor Dr. Shamshad Akhtar said last week that the privatisation proceeds, which are used to finance the current account deficits, account only 13 to 14 per cent of the gap.

However, the government has planned to issue GDR (Global Deposit

Receipts) of several public sector companies to raise substantial amount that would help it finance the current account deficits.

The government is set to raise $800 million through GDR of Oil and Gas Development Company (OGDC).

Economic mangers of the country are also planning to issue sovereign bonds in the international market to raise more foreign exchange. However, analysts believe that the borrowing would further burden the country’s balance of payment ability as debt servicing would increase. The government has already issued Euro Bonds and Sukuk Bonds, a Shariah compliance banking product.

The rising trade imbalance is also a sign of government’s trade policy, which failed to push the export as per the target of 13 per cent and narrow the gap. The exports have so far increased by just over 4 per cent.

“The main hurdle in the way of narrowing the trade gap is the increasing oil bills,” said an analyst. He said the import of fuel oil has gone up by 50 per cent during the first five months.

The balance sheet of the current account deficits shows that services sector was also on the negative side as the balance of goods and services reached minus $6.175 billion during July-Nov.