The SBP report showed that the small deficit was mainly due to higher exports, lower imports and record remittances sent by the overseas Pakistanis. - File Photo.

KARACHI: The current account deficit during the first seven months of this fiscal year stood at just 2.6 per cent of what it was in the corresponding period of last fiscal year.

The SBP report showed that the small deficit was mainly due to higher exports, lower imports and record remittances sent by the overseas Pakistanis.

While the economy is not in a good shape, the external front is sending strong signals to the outer world offering opportunities for investors to rely on the country's stable external accounts and strong capacity to make foreign obligations and payments, observed an analyst.

He added that the record foreign exchange reserves of over $17.4 billion were also positive sign for the economic recovery.

One of the best results produced out of the record foreign exchange reserves and remittances and the negligible current account deficit was the exchange rate stability.

The country maintained the rupee-dollar exchange rate at the same level during the last 12 months (Feb 2010 to Feb 2011), which also reflects the economic stability.

The State Bank and ministry of finance last month had identified economic indicators emerging as symbols of recovery. It included 24 per cent growth in textile export, higher wheat crop, record foreign exchange reserves and very small current account deficit.

The State Bank provided fresh information regarding the current account ratio to gross domestic product (GDP).

According to the SBP report the current account ratio to GDP was just minus 0.1 per cent in July-January 2010-11 while it was minus three per cent during the same period last fiscal year.

Analysts said the economy was on the strong footing on the external front, but it needed a growth rate of at least by six per cent to generate higher revenue, reduce fiscal imbalances, create jobs, increase exports and cut dependence on borrowings from State Bank and commercial banks.

The SBP report shows that exports grew by 20.3 per cent compared to 10.4 per cent import growth during the first seven months of the fiscal year.

Experts fear that the import bill could see a hefty increase in the coming months if oil prices remain around $100 a barrel.

It said the current account deficit in January 2011 was $62 million from a surplus of $570 million in December 2010.

Analysts accounted Coalition Support Fund of over $700 million as one of the reasons for lower current account deficit this year.

However, an exporter said they fetched better price of their textile products which increased the export growth.