KARACHI: The current account deficit has reached $14 billion in the first 10 months of the current fiscal year, higher than the foreign exchange reserves of the State Bank and close to remittances during the same period.
The increasing current account deficit has taken the central position in the economy as the large borrowings by the government to meet its increasing demand of foreign exchange has made the problem more acute.
The State Bank reported on Friday that the current account deficit for July-April FY18 rose to $14.035bn, up 50 per cent, from $9.354bn in the same period of previous year.
Though the debt servicing has been on the rise due to higher borrowing of dollars from commercial markets and other sources, the trade deficit remained the primary reason behind this growing current account deficit.
The trade deficit during the period under review was $29.22bn – well above the exports of goods and service which amounted $24.8bn.
Relentless import growth pushes 10-month trade deficit to $29bn
The government has failed to curtail the import bill which further increased this year. While the higher price of petroleum products pushed up the bills, the import of luxuries including costly vehicles and food products also played key role in this huge trade deficit.
The SBP report shows the current account deficit in April grew to $1.95bn compared to $1.2bn in March indicating that no strategy worked against the soaring deficit. The remaining two months of the current financial year could end up seeing the total deficit raised to around $17bn.
The 10-month current account deficit reached close to the remittances figure during the same period. The deficit is met through the remittances but huge trade deficit has made it impossible for the government to deal with it.
The current account deficit is currently equal to 86pc of the remittances received in 10 months of FY18. However, the figure is $3.2bn higher than the SBP reserves which stood at $10.8bn on May 11.
Experts believe that the huge current account deficit would compel the next government in Pakistan to approach International Monetary Fund since the hope for any revolutionary boost in exports is out of sight.
Published in Dawn, May 19th, 2018