KARACHI, Nov 10: The current account deficit of the country widened to over $1.4 billion in the first quarter (July-September) of the current fiscal just close to $1.5bn full year deficit of the last fiscal.

The data posted on the website of the State Bank showed that the main reason behind the huge increase in the current account deficit was the widening trade deficit mainly because of higher oil bills and increasing machinery import. The country was enjoying a surplus of $199 million in the same quarter last year.

Analysts warned that the sharp jump in the current account deficit might erode the hard earned foreign exchange reserves, which had already slipped from $13 billion in April 2005 to $11.7 billion in November 2005.

The record high oil prices, which touched $70 per barrel, played a key role in widening the current account deficit. For the last four years, the current account deficit was substituted by the remittances and it remained in surplus, but during the last fiscal the 8.4 per cent economic growth had accelerated pressure on import of machinery and raw materials.

Analyst said that growth in export was far less than the expectation while the import was increasing unexpectedly higher which created serious problem for the country.

The State Bank has been paying oil bills for more than a year which helped to maintain stability in the exchange rates but now its depleting reserves might hit the exchange rates also. Analysts said that there was a possibility of pressure on rupee.

The trade deficit in the first quarter, July-September 2005, was $1.9 billion reflecting its key role for increasing current account deficit.

The first quarter remittances sent by the overseas Pakistani workers were more than $1 billion giving hopes that the total remittances may cross $4 billion by the end of the current fiscal.

“The high remittances are encouraging but the level of rise in current account deficit is much more to shatter the confidence of the economic managers of the country,” said another analyst.

Most of the analysts believed that the current account deficit might cross $6 billion by the end of the current fiscal. They said that it was alarming and threatening for the country as it could push the country back on the track of pre-1999 era when the country had reserves sufficient only for few weeks of imports.