KARACHI: The current account was in a deficit of $591 million in July, more than double the amount of $234m noted in the same month of the last year.

It seems the weakness of external segments of the economy reflected in trade deficit, sharp fall in remittances, pressure on foreign exchange reserves and shrinking foreign direct investment (FDI).

The country failed to get rid of the current account deficit last year, too, despite record high foreign exchange reserves and remittances. The deficit stood at $2.5 billion in the fiscal year 2015-16, slightly less than the preceding year.

The current account is the broadest measure of trade, covering not only the flow of goods and services but also investment flows. A deficit reflects Pakistan’s trade gap with the rest of the world and the shortfall between money paid out by the country and money coming in.

The current situation could turn worse since FDI dropped in July while the trade deficit stood at $1.878bn, according to the State Bank of Pakistan (SBP).

The government was targeting $35bn exports proceeds during the current fiscal year, which is seen as unrealistic by trade bodies.

The SBP reported that the collective exports of goods and services stood at $27.46bn in 2015-16 whereas the imports were $48.3bn, which translated into a trade deficit of $20.85bn.

Exporters and analysts see a further decline in exports to the Middle East as the region has been facing financial crunch after massive fall in oil prices. The oil money had been a catalyst for the businesses in United Arab Emirates (UAE), with Pakistan being one of the beneficiaries.

In the preceding fiscal year, China replaced the UAE as the biggest trade partner of Pakistan.

Despite rapid increase in the trade with China, Pakistan failed to improve its exports to the country; instead it fell in the previous fiscal year. Analysts believe the trade deficit, which has the direct relation with the current account deficit, could have been much bigger had the oil prices not fallen to the record low level — Pakistan saved $4.5bn in the oil import bill due to cheap oil.

The government has planned to borrow from international currency market to improve its reserves which are set to fall this year due to expected higher debt servicing.

Pakistan has yet not approached the International Monetary Fund for further borrowing which means the pressure would mount on the foreign exchange reserves amid decline in remittances and FDI, and poor exports growth.

Published in Dawn, August 20th, 2016