C/A deficit swells to $454m in July

Published August 23, 2014
What is more concerning is that the inflows of dollars have stopped for the last couple of months while the IMF has also delayed its tranche which was due this month. — File photo
What is more concerning is that the inflows of dollars have stopped for the last couple of months while the IMF has also delayed its tranche which was due this month. — File photo

KARACHI: The current account deficit rose in the first month of this fiscal year, both as compared to July last year and June 2014.

The State Bank reported on Friday that the current account deficit on July 15 was $454 million, much higher than $125m a year earlier.

Despite very high remittances of about $16bn, the current account deficit is a serious concern for the government which has borrowed heavily from the international market on unexpectedly high rate of return. This could further escalate the seriousness of imbalances on external fronts.

In FY2013-14, the total current account deficit was $2.97bn, 19 per cent higher than the preceding year, and it happened despite large inflows of dollars.

The ever increasing trade deficit has been real problem for economic mangers as they have failed to control its size. The figure was $135m in June this year, which means a surge of $319m in July to make the total $454m.

Though the size of foreign reserves is enough to meet the deficit, it could rise above $5bn this fiscal year if it continues to increase with the volume like in July.

What is more concerning is that the inflows of dollars have stopped for the last couple of months while the IMF has also delayed its tranche which was due this month.

The impact of no inflows reflected in the reserves of the State Bank which fell below $9 billion last week and could decline further in the coming weeks.

The continued political uncertainty has jammed the economic machinery. The trade and industry people say the entire government, including finance and commerce ministries, is busy tackling the turmoil engulfing the country.

Published in Dawn, August 23rd, 2014

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