KARACHI: Though the current account deficit was more than $1.5 billion in the first half of the current fiscal year, the month of December surprisingly posted a surplus of $285 million.

The State Bank reported on Tuesday that the C/A deficit remained high at $1.589bn in the first six months (July-Dec) for the current financial year, the surplus in December reduced fears of rise in deficit.

The rising deficit has already put a negative impact on country’s foreign exchange reserves and exchange rate regime. The reserves are also unable to neutralise the current account deficit. Although the country has managed to arrange $6.6bn IMF loans which would help improve reserves, the trade imbalances are weakening the reserves and balance of payments.

The trade imbalance during the six months rose to $8.35bn compared to $7.9bn during the same period last year. However, one of the reasons was low repayment to IMF that helped reduce the current account deficit.

The State Bank governor recently stated that the country greatly benefited from Chinese help to reduce imbalances on external payments. Pakistan fully utilised the currency swap agreement of $1.5bn with China. The trade between the two countries has been rising each year.

In FY-13, the total trade between the two countries was $7.5bn while this year, it could be around $8.5bn.

The current account surplus helped exchange rate stability.

For the last one month, the dollar price remained constant both in the inter-bank and open markets, with slight fluctuations.

The economic managers believe that the foreign exchange inflows would be higher in the second half of this year. The finance minister also stated recently that reserves would increase in the next few months with the help of loans from IMF and other sources.

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