March 13, 2007	Tuesday	Safar 23, 1428

KARACHI, March 12: Country’s current account deficit rose alarmingly high in the first seven months mounting pressure on the government to earn or borrow more dollars to bring the balance sheet of the national economy at equilibrium.

Official data issued on Monday showed that the current account deficit jumped by 42.3 per cent during July-January, 2007 to reach $4.811 billion. It was just $3.381 billion during the same period last year.

The current account deficit has been dominated by the overweight trade imbalance but the seven months results show that the balance of trade increased by 24.5pc while the current account deficit rose by over 42 per cent.

The main reason for high C/A deficit was the slow exports growth and higher imports. Analysts said it was alarming because the oil prices had come down and outflows should be substantially low.

However, oil bills rose during the current year because of higher import of petroleum products and it would go further high as the need of thermal electricity rose sharply.

The analysts predicted that the oil bills would go further high in the coming years to maintain the rate of economic growth at 7 per cent and this would further create imbalance in payments of foreign exchange.

The services sector balance is another point of concern as the country has been paying almost 100 per cent more than what it received from this sector.

The balance of services sector during the same period was negative at $2.557 billion. Balance of goods and services reached minus $8.663 billion compared to $7.355 billion during the corresponding period last year.

“The government is lucky as the global market has excess liquidity and this money is looking for to penetrate into the markets where high profits could be earned, irrespective of high risk and political instability,” said Salman Ahmed, an independent economist.

The data of foreign private investment also issued on Monday showed that during the seven months it rose by 70 per cent. Foreign direct investment increased by 68.4 per cent to $2.096 billion during the period.

“Despite lack of privatisation proceeds the inflows of foreign investment would help the country to meet its balance of payment,” said Salman.

However, most of the analysts were of the view that the inflows of foreign investment were not sustainable and any political or economical instability can stop it or reduce it significantly.

“There is no policy or strategy to eradicate the haunting C/A deficit problem, rather the government depends on unsustainable resources like foreign inflows,” said another analyst.