KARACHI: The current account deficit for July-October increased 122 per cent year-on-year, according to data released by the State Bank of Pakistan (SBP) on Monday.

It jumped to $5.013 billion against $2.259bn a year ago. In October alone, the deficit was $1.315bn, up 19.8pc from the preceding month.

The government has so far been unable to control the widening current account deficit, which can be devastating for the economy amidst depleting foreign exchange reserves.

The government planned to issue sukuk worth $500 million to $1bn in November. But the absence of Finance Minister Ishaq Dar from the country made it impossible. Despite an improvement in foreign investment, exports and remittances have remained largely flat.

The SBP reported that exports increased slightly during the first four months of the current fiscal year. However, the year-on-year increase in imports was unusually high. Exports went up 11.3pc to $7.65bn during the period under review as opposed to a rise of 26.2pc in imports that amounted to $17.4bn.

The government is already under pressure because of rising imports, which caused a trade gap that was even higher than total exports in 2016-17. Oil prices are going up due to the political unrest in the Middle East. This can possibly increase the oil import bill going forward.

There is little chance of an improvement in exports this year because of political uncertainty. This is particularly true in the case of the Ministry of Finance, which suffers from a lack of decision-making at the top level.

The government announced an incentives package of Rs180bn in January to boost exports. However, it led to a slight increase in exports. The current account deficit was $12.4bn in 2016-17 and may cross $15bn in 2017-18.

The SBP has managed to maintain the exchange rate so far. Foreign exchange reserves of commercial banks have gone up to $6bn, which help maintain the inflow and outflow of dollars. Importers buy dollars from banks for their imports. Even the oil bill is paid through banks.

The current account deficit is being bridged through SBP reserves, which have witnessed a steep fall of over $5.2bn since October 2016.

Published in Dawn, November 21st, 2017