KARACHI: The current account deficit jumped to almost $9 billion in the first 11 months of 2016-17, the State Bank of Pakistan (SBP) reported on Thursday.

It increased 177 per cent year-on-year from $3.217bn in the first 11 months of 2015-16. This means the country’s external sector is under pressure.

A separate report shows the trade deficit has also risen to $30bn in the 11-month period. Imports have been rapidly increasing for the last three years. The government argues that a big part of these imports consists of machinery that will ultimately enhance the export capacity of the country.

The government contained the current account deficit at $3.4bn in 2015-16, although the trade deficit rose quickly. Economic managers did not come up with a workable strategy to deal with the increasing trade and current account deficits.

The government bridged the growing trade deficit with remittances that overseas Pakistanis send home every year. But remittances also started declining due to changed political and economic conditions in the Middle East. Pakistan receives about 65pc remittances from the Gulf region every year.

Economists blame poor exports for the increased current account deficit. They also believe the commerce ministry has failed to play its due role in growing exports, which have been in decline for the last four years.

The textile sector, which brings in about 60pc of export proceeds, recently started a protest against the government that, it says, has failed to fulfil its promises. The government has yet to pay sales tax refunds that amount to around Rs300bn. Exporters say the government announced a package of incentives worth Rs180bn for the export sector, but released just Rs2bn.

The massive increase in the current account deficit can hit the exchange rate regime as foreign exchange reserves have been continuously declining since October 2016. The country’s reserves are still over $20bn, but rising debt servicing is expected to bring them down.

Published in Dawn, June 23rd, 2017