May 22, 2008	Thursday	Jamadi-ul-Awwal 16, 1429

KARACHI, May 21: The current account deficit of the country further rose to $11.586 billion in the first 10 months (July-April) of current fiscal year mounting pressure on the country to increase borrowing and pay more towards debt servicing.

The State Bank of Pakistan on Wednesday reported that the country’s current account deficit rose sharply and it was 75 per cent higher than the corresponding period of last year.

Over 90 per cent of the current account deficit was the result of huge trade deficit of $12.740 billion. The poor export growth left the path open for the imports to set new records each month.

The analysts said the failure of economic policies, especially the export sector, has been a salient feature of the previous government, which despite rising trade deficit failed to improve export growth.

The current account deficits were met through high growth in overseas workers’ remittances and foreign investment, which helped the economic managers of the country to hide the real picture of deficit financing.Analysts said that the current account deficit was record high but still not out of control. They said the inflows are lower than the current account deficit, which made it difficult for the country to arrange more dollars for external payment.

The country received $3.5 billion as foreign direct investment and $5.4 billion as workers remittances in the first 10 months of current fiscal year.

However, the analysts maintained that had the oil prices not jumped more than double in a year, the deficit could have been easily met through the workers’ remittances and foreign investment.

The county has already paid $8.7 billion as oil bill in last ten months and oil prices are still increasing to tear apart the economies of the developing countries like Pakistan.

The impact of higher production of oil by Saudi Arabia failed to produce any impact as the oil prices kept moving upward every day. The oil import bill was 47 per cent higher than the corresponding period of last year.

“The rising oil prices, if not stopped, could further increase the demand of dollars in the world market and Pakistan will have to borrow to keep the minimum availability of fuel in the country,” said Fareed Ansari, an oil expert.

He said the currency speculators had found very attractive opportunity in the form of ever-increasing oil prices, which has been pushing up dollar demand providing more openings for the speculators to earn bigger profits. The dollar demand increased the world over with the rising prices of oil as the entire transactions in oil trading are being done in dollars.

Analysts of brokerage houses were of the view that a cut in import of luxury items was must to save the economy from external payment shocks.

A number of currency dealers also confirmed that dollars had been bought to import costly vehicles, including bullet proof cars, as the demand for luxury vehicles were high in the country.

“This is a wrong perception that it is only the oil bill that has destroyed the external balance sheet of the country,” said Mr Fareed adding that large import bill of imported vehicles would be visible in the final report at the end of the fiscal year.