KARACHI, May 17: The current account was again negative in April, putting more weight on overall imbalances during the first 10 months of the current fiscal year.

The State Bank reported on Thursday that the country’s current account deficit widened to $3.394 billion during the April-July period, with an addition of $313 million deficit last month.

The month-to-month rising deficit is an alarming message for economic managers, particularly in the wake of a steep fall in foreign exchange reserves. The scenario was different during the same period last year as it was surplus with $466 million.

The main reason for deficit was the enlarged trade deficit which was almost 49 per cent higher than the previous year. The details further reveal that exports could hardly improve by 0.1 per cent while imports rose by 14.5 per cent during the first 10 months of the current fiscal.

The massive trade imbalance changed the current account deficit’s relation with the gross domestic product (GDP). Last year current account to GDP ratio was surplus by 0.3 per cent, but this year it has been minus 1.7 per cent so far.

The deficit on external front has been a serious problem for the country, but the drying up of foreign inflows this year has further aggravated the situation. Despite record remittances being sent by the overseas Pakistanis, the external account is facing deficit.

Atif Ahmed, an analyst and currency expert, said any shortage or hurdles in remittance could badly affect the country’s strategy for foreign payments and default would be immanent.

According to SBP report, foreign exchange reserves further fell to $16.103 billion on Thursday. These have declined by over $2.2 billion since July.

Currency experts said the depletion of dollar reserves could escalate in the months to come as foreign investment fell by 63 per cent, oil prices were on the higher side, country has failed to negotiate new loan agreements with the IMF and outflows in terms of profits and dividend were more than inflows.

The business community is keenly observing the Pakistan-US dialogue on the opening of Nato supply routes and expressed the hope that its positive outcome would clear the way for the country to negotiate loans with international donors.

“We don’t want to see the country at the brink of default as we witnessed in 2008 when it had to sign a $11.2 billion loan deal with the IMF to avoid severe consequence of current account deficit,” said Aamir Aziz, an exporter of textile products.

He said the country should immediately negotiate loans because the repayment of previous IMF loan might empty the entire foreign exchange reserves.

The IMF loan stands at about $7.8 billion.