KARACHI, May 9: The current account deficit of nine months has gone up further to $6.015 billion making it more difficult to meet the gap as the government’s dependence on foreign inflows and borrowings is on the rise.

Despite high foreign flows in the form of remittances and foreign investment, the rising current account deficit poses a threat to the government’s ability to pay back its foreign bills and this may result in further borrowings from the market.The increased trade imbalance has sharply reduced the government’s ability to pay import bills for a longer period.

Just a couple of years ago, the government could pay import bills through its reserves for eight to nine months, but now State Bank’s reserves are hardly enough for five months.

The latest official data issued on Wednesday showed that the current account deficit during July-March 2007 was 43 per cent higher than the deficit during the same period last year.

Another data issued the same day showed that the trade deficit of 10 months has reached $11.083 billion, far from the government’s target of $9.4 billion for the whole year.

The real cause was the much below export growth and higher import growth despite decline in petroleum prices.

The import bill is rising on account of a number of products, which could be avoided, like huge import of luxury cars, vegetable and vegetable products, fruits and dry fruits, and a number of agricultural products.

Analysts said the 10-month trade deficit, which crossed $11 billion mark, would further increase the current account deficit. They said it was threatening the country’s ability to pay the rising import bill.

“We are obviously going to borrow more to meet the rising demand of dollar for import bills and debt-serving but the more we borrow, the more we need dollars to service the debt burden,” said Anees Alam, an economist.

He said the country’s exports have been facing serious challenges since the end of MFA (Multi Fiber Agreement) which eroded the boundaries for textile exports.

“It was known 10 years before the end of the MFA that China and India would pose a real threat to the only large textile sector of Pakistan, but the government failed to make any strategy for the times to come,” said Anees.

Pakistan is facing a cut-throat competition in the world textile market and Bangladesh has also emerged as the main competitor of Pakistan and has captured a sizeable place, replacing Pakistan from its traditional markets of Europe and America.

The data also showed that Pakistan has been paying more in services than it receives in this account. Pakistan paid $6.249bn for services and received only $2.780 billion in the same account.