April 10, 2007	Tuesday	Rabi-ul-Awwal 21, 1428

KARACHI, April 9: Soaring trade deficit has further aggravated the situation of the country’s negative current account balance threatening to even off set the positive impact of higher foreign direct investments and massive inflows by overseas Pakistanis.

Officials report showed that the current account deficit increased by 50 per cent to negative $5.564 billion during the first eight months July-Feb 2006-7 compared to minus $3.723 billion over the corresponding period last year.

Concerns creeping in among the economists that in the wake of rising foreign debt and slow export growth, the widening of current account deficit could create unbearable burden on the economy as the country is open for outflows of each penny invested and profits earned here.

The slow export growth which is unmatched with import growth is the real cause of widening of current account deficit but the balance of services was also much against the country’s ability to keep continue making foreign payments.

The trade deficit in terms of percentage has reached 61 per cent or the imports were 61 per cent more than exports.

Analysts said that despite all incentives and huge subsidised loans, the textile sector looks failing to compete with the two neighbouring giants India and China. The textile sector earns over 60 per cent of the total foreign exchange for the country. The country’s economic mangers have been failed to diversity their exports neither they succeeded to find new markets which resulted in losing the markets in the hands of India, China and even Bangladesh.

Data released on Monday showed that the services imports were much against the country’s weak current account deficits helping the deficit to further widen. Imports of services during the eight months were $5.592 billion compared to exports services of $2.556 billion during the same period.

The country has been relying mostly on foreign direct investment and workers’ remittances to meet the current account deficit and both have increased to record level. Foreign private investments during the same period were $3.952 billion compared to $1.992 billion of the previous year.

“Despite encouraging signs of heavy inflows balance sheet shows negative balance and the current account deficit is widening which should be taken as threat for the country’s ability to make foreign payments,” said Aamir Saleem, an analyst.

The government has also decided to issue Eurobonds in the range of $800 to $1,000 million. This borrowing will increase the ratio of debt servicing having negative impact on the balance sheet of the country, he said.

Analysts expressed concern that any incident in the region could fuel the oil prices and that would add enormous problem for the country which depends on imported petroleum products. The oil bill is still the biggest one in terms of amount the country pays for any import.

They said that the fuel bills would go higher even if the prices remain constant as the consumption has been increasing because of growing energy demand to achieve a 7 per cent economic growth.