ISLAMABAD, Nov 29: Backed by a slight improvement in trade account, the current account deficit in the first four months of the current fiscal year narrowed by $518 million and stood at $2.996 billion against $3.514 billion last year.
The shrinking trend in the current account has been witnessed for the second consecutive month of the current fiscal year owing to a surge in inflow of remittances, foreign direct investment, particularly the PTCL installment of around $300 million and stagnation in the import bill.
As a result of these developments, the current account deficit in the first four months of the current fiscal year stood at 1.8 per cent of the projected GDP for the year as against 2.4 per cent in the corresponding period of last year.
Analysts said the real barometer of this positive development will be gauged from the second quarter (October-December) figures.
If the trend continued in the second quarter, it is expected that by end June 2008, the current deficit will witness a considerable decline.
The statistics compiled by the finance ministry showed that exports (on fob basis) grew at an average rate of 10.8 per cent during the first four months (July-October) of the current fiscal year, amounting to $5.997 billion against $5.413 billion last year.
This growth in exports was just 4.1 per cent in the same period last year.
Exports grew by 3.3 per cent in the whole year of 2006-07. Export growth of 10.8 per cent in the first four months (July-October) of the current fiscal year is certainly an encouraging trend, which needs to be further improved.
Exports are targeted to grow by 8-10 per cent in the current fiscal year.
Imports, on the other hand, grew at a modest rate of 4.3 per cent, amounting to $9.530 billion against $9.137 billion last year.
However, this growth in import bill was 14.5 per cent in the same period last year.
Imports were up 8.2 per cent in the last year and grew at an average rate of 35 per cent during the previous two years (2004-05 and 2005-06).
Import growth appears to be on the path of moderation and is expected to grow in the range of 6.5 per cent to seven per cent in the current fiscal year.
The tight monetary policy pursued by the State Bank of Pakistan appears to have played a role in moderating import growth.
As a result of developments on exports and imports, the trade deficit reduced by $191 million, from $3.724 billion in the first four months of the last year to $3.533 billion during the first four months this year.
The narrowing of trade deficit is the direct result of improvement in exports on the one hand and a moderate growth in imports on the other.
The trade balance of Pakistan widened in recent years on the back of strong economic growth sustained by domestic demand.
Improvement in the trade balance during the period under consideration is an encouraging development and will have a salutary impact on country’s overall balance of payment.
Invisible balance maintained a surplus of $537 million during the first four months of the current fiscal year as opposed to $210 million in the same period last year.
Private transfers also registered an improvement of 27.4 per cent, rising from $2.899 billion to $3.693 billion during the period under consideration.
Workers’ remittances — a major component of private transfers also grew by over 26.5 per cent to $2.080 billion in the first four months of the current fiscal year as against $1.644 billion last year.
