KARACHI, June 26: The capital account deficit increased by $292 million during the third quarter of this fiscal year to reach $987 million despite a higher foreign direct investment, rising trade financing through foreign currency deposits and increased assistance on account of project-financing.

“The reason for this increased outflow is the write-off by the US which is recorded as an outflow in long-term capital (official),” says the third quarterly report of the State Bank.

“Excluding debt write-off and FE-25 (foreign currency deposits) trade financing, the adjusted capital account outflow of $804 million in Q3 FY02 has decreased to $187 million during Q3 FY03, posting an improvement of $617 million.”

This improvement was mainly driven by the following factors: (i) lower repayments of special US dollar bonds and short-term commercial banks and IDB loans (ii) increased disbursements for project financing from international financial institutions and bilateral countries and (iii) higher foreign direct investment.

The report says that overall net foreign investment showed a reversal from an outflow of $75 million during Q3 FY02 to an inflow of $39 million during Q3 FY03 mainly due to lower maturity of US dollar bonds and higher FDI. “Cumulatively the net foreign investment increased to $353 million to $356 million during the first three quarters of the current fiscal year over the corresponding period of FY02.”

The FDI posted a growth of 128.9 per cent during July-March FY 03 mainly due to the privatization of UBL and some and oil and gas fields. “Excluding privatization receipts the FDI registered a growth of 24.7 per cent.”

As usual, investors from the US, UK and UAE accounted for the bulk of the FDI.

Foreign investment in stock registered an outflow of $23 million during Q3 FY03 against an inflow of $55 million in Q3 FY02.