KARACHI, May 17: The rising current account deficit is taking a tough shape for the upcoming government amid shrinking foreign exchange reserves and foreign investment while future course of economic strategy is still uncertain.
With better start the current account was in surplus in the first quarter, but now the country was facing a current account deficit of $1.418 billion in the first 10 months (July-April) of 2012-13.
The State Bank reported on Friday that in April 2013 the country posted a current account deficit of $354 million indicating that by end of June 30 the current account gap may touch $2 billion, which will still be significantly lower compared to$3.354bn in the first 10 months 2011-12 and $4.658bn in the whole fiscal year.
However, last year the foreign exchange reserves were in much better shape to bear the load of large current account deficit.
According to State Bank’s report the reserves of the country in April 2012 were $16.486bn while the holdings of the State Bank’s alone were $12 billion, which have fallen to just $6.5bn now.
The large current account deficit of $4.5bn of last year drastically eroded the reserves and weakened the rupee against the dollar. The country needs an immediate foreign aid to avoid default on external front.
Business circles believe the newly-elected government of Nawaz Sharif would be able to improve the economy and would dealwith the IMF for current account support.
During the last 21 months the external debt of the country declined mainly because of massive debt servicing.
The State Bank’s another report showed that the country during the last three quarters cumulatively paid $4.6bn in debt servicing. In FY12 the country paid $4.5 billion in debt servicing.
The figures showed that the outflow of dollars from the country is very high thanks to poor security situation across the country.
“The welcoming messages from the Western democratic countries for the newly elected government are a hope that Pakistan may get access for its textile products to European and American markets,” said Aamir Aziz, an exporter of textile made-ups.
However, he believes that no improvement would be there unless the terrorism is eradicated from the country.