KARACHI: Despite record remittances and savings due to fall in oil prices, the current account deficit was high during the first eight months (July-February) of this fiscal year.

It was though a little lower at $1.859 billion compared to $1.94bn during the same period a year earlier, the State Bank of Pakistan (SBP) reported on Monday.

Moreover, the current account was in a $157 million surplus in February compared to a deficit of $590 million in January.

The widening trade deficit, which rose 4.22pc year-on-year to $15.102bn from $14.490bn during the period, has been a major cause for the current account deficit.

The trade deficit was expected moderate due to oil prices but the country failed to control the imports bill which offset the impact of savings from oil imports.

Another SBP report showed that during the first seven months of the current fiscal year, oil import bill fell from $8.33bn to about $5bn, thus saving around $3.33bn.

The current account is the broadest measure of trade, covering not only the flow of goods and services but also investment flows.

Another major inflow that helps reduce the current account deficit was remittances sent by overseas Pakistanis. During July-February 2015-16, the remittances rose to $12.7bn, which was close to the country’s goods exports of $14.3bn during the same period.

The remittances, which are now the backbone of the economy, have been increasing each year, but the economic managers of the country have failed to get control of the current account deficit. The country has to borrow dollars at very high rates from international markets while an amount like $12.7bn remittance is almost free.

Analysts feel that the government needs a policy to get control over the current account deficit, particularly in the wake of high inflows of remittances, record low oil prices and record foreign exchange reserves.

Reports for the first two quarters of FY16 showed that the current account deficit sharply increased from $351m in July-September to $1.074bn in October-December.

Published in Dawn, March 22nd, 2016