KARACHI: The previous month saw current account switch to surplus for the first time this fiscal year, helping the country to reduce the mounting fear about widening deficit during the preceding two months.

The State Bank reported on Monday that the current account was in $3-million surplus in September. Although the amount is meagre, its impact was significant in terms of signal it gives since the current account deficit widened to $1.372 billion during July-August period, almost half of $2.971bn deficit during entire FY14.

However, the current account deficit remained at $1.33bn for the first quarter (July-September) of this fiscal year. The deficit in the same quarter of last year was $1.268bn.

The details showed that the balance of trade in services has improved significantly as the deficit in the first quarter reduced to $447m, exactly half of $894m during the year-ago period.

The improvement in both the current account and balance of trade in services was due to almost 100 per cent increase in export of services from Pakistan. The services export during the quarter jumped to $1.712bn from $992m.

The fact that the services imports did not rise on a par with exports also helped in reducing trade deficit in services.

The country has been struggling to improve its balance of trade but the exports showed less improvement while the imports kept on rising.

Overall exports during the July-September period dropped to $5.960bn from $6.275bn a year ago. By contrast, the imports increased to $11.822bn from $10.576bn.

Experts say that the negotiations with the IMF could help in releasing two tranches amounting to $1.1bn by the end of second quarter (October-December). This will improve the balance sheet of the country.

However, the low foreign investment, higher repatriation of dollars in terms of profits and dividends, and huge debt servicing will continue to keep pressure on the country’s ability to meet its foreign obligations.

Published in Dawn, October 21st , 2014