KARACHI: The current account deficit rose to $2 billion in the first seven months of this fiscal year.
Despite the government efforts no improvement was noted in the dollars inflows while the outflows were too high resulting in serious imbalance on external front during the period under review.
Analysts and bankers said that higher remittances could not cover up the widening current account gap, which indicates weakness of the economic strategy that has yet to deliver. The remittances increased to over $9bn in the first seven months of FY14.
The State Bank reported on Wednesday that the current account deficit widened to $2.055bn during July-Jan period of 2013-14 compared to $441 million deficit in the same period of previous year.
The situation looks extremely odd as the foreign exchange reserves fell to $7.6bn of which the State Bank held just $2.8bn which the government can use to meet its expenses.
The main reason for rising deficit was the imbalance in the trade of services as the export of services fell sharply during the period under review.
The export of services plunged to $2.705bn from $4.465bn in the corresponding period of last year.
Bankers say the agreement with the IMF has yet not supported the country’s poor health of reserves which is why the exchange rate regime is under pressure, current account deficit is rising and the government is struggling to meet its foreign payment obligations.
After receiving disbursement from the Coalition Support Fund (CSF) the country is expected to get second tranche of IMF loan this month.
Currency experts said the dollars were easily available in the open market while the inter-bank market is walking on tightrope.
Currency dealers said the finance ministry has been influencing the market as the exchange rate is stable for over a month, but the experts said it would not last longer.