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KARACHI, Nov 27: Pakistan had to seek a much smaller amount of exceptional financing in the first quarter of this fiscal year compared to last fiscal — as a result of a lower than last year’s trade deficit.
Government sources said exceptional financing declined to $231 million in July-September 2001 from $584 million in July- September 2000. This means the country got much lesser amount of external debt rescheduled or rolled-over in the first quarter of this fiscal year than what it had in the same period last fiscal year. The figures form part of the latest balance of payments (BOP) statement—i.e. for the first quarter of fiscal 2001-02.
The sources said what made it possible was a big fall in trade deficit. Trade deficit fell to $194 million in July-September 2001 from $568 million in July-September 2000 as Pakistan had to pay 25 per cent less on oil import because of a price slump. Further, food import bill also fell by about 38 per cent.
In the services sector also Pakistan saw a smaller deficit in the first quarter of this fiscal year than in a year-ago period.
In July-September 2001, services deficit fell to $826 million from $884 million in July-September 2000. That became possible as the country had to pay a lesser amount as freight charges to foreign shipping lines and its investment losses also shrank. Pakistan spent $197 million on shipment in the first quarter of this fiscal year against $213 million spent in a year-ago period. At the same time, its investment losses fell to $570 million from $653 million.
Though trade and services deficit that went down in the first quarter of this fiscal year, the current transfers surplus posted no increase—the surplus slipped marginally to $959 million from $971 million.
Bankers said the central bank purchased $397 million from the open currency market in July-September 2001 up from $227 million in a year-ago period. But that could not lift current transfers as home remittances fell to $340 million from $366 million and the inflow in resident foreign currency accounts totalled just $23 million in July-September 2001 against $76 million in a year- ago period.
Thus Pakistan was able to cut its current account deficit to $61 million in the first quarter of this fiscal year from $481 million in the same period of last year. (Current account deficit is the sum of trade and services deficit plus current transfers surplus).
CAPITAL ACCOUNT: Whereas the country managed to contain the current account deficit, its capital account deficit went up to $596 million in July-September 2001 from $441 million in July- September 2000.
The factors contributing to this situation included (i) lower foreign investment (ii) lower amortization; and (iii) a drastic fall in official assistance. The country attracted net foreign investment worth only $16 million in the first quarter of fiscal 2001-02 down from $27 million received in the same period of last fiscal year: Amortization (i.e. reduction in principal or total debt) during July-September 2001 also fell to $537 million from $658 million and official assistance sank to minus $17 million from $52 million.
CHANGES IN RESERVES: In the first quarter of this fiscal year, the country saw a net buildup of only $80 million in its foreign exchange reserves, down from $295 million in the same period of last fiscal year.
The foreign exchange assets saw a decline of $140 million in July-September 2001 against a buildup of $368 million in July- September 2000. At the same time the foreign exchange liabilities rose by $220 million compared to a decline of $73 million in the last fiscal year.
In the first quarter of this fiscal year, there was a draw down of $45 million on the SBP foreign exchange reserves and that of $97 million on the reserves of the banks. In the same period of last fiscal year, the reserves held by the SBP had risen by $322 million and that of all other banks by $46 million.
On the other hand the country used $220 million worth of net IMF credit in the first quarter of this fiscal year that formed its foreign exchange liabilities.
After adjusting exceptional financing of $231 million in the first quarter of this fiscal year, the financial managers had to keep room for $346 million inflows due to error and omissions to justify the SBP’s closing reserves at $2.134 billion at the end of September 2001.
This amount of SBP’s reserves was twice what it had at end of December 2000—$1.034 billion.
