KARACHI: The current account deficit swelled 136 per cent year-on-year to $1.368 billion during the first quarter of this fiscal year, the State Bank of Pakistan (SBP) said on Thursday.

The is alarming for the country which has record foreign exchange reserves of over $24bn while the inflows of overseas workers’ remittances are still healthy despite an annual decline of 5pc.

Exports fell 5.1pc to $5.042bn during the July-September quarter from $5.313bn a year earlier. But the size of current account deficit is much more than the trade deficit which indicates that the inflows from other sources are drying up.

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

Exports are in decline for the last few years, becoming a major reason for shortage of inflows. They stood at $21.97bn during the fiscal year 2015-16 and at $24bn in 2014-15.

Analysts and economists say borrowed dollars are not enough to tackle the increasing current account deficit.

Remittances sent by Pakistanis working abroad are also under pressure, particularly because inflows from oil-rich Gulf countries are no more dependable amid low oil prices. Reports appeared in the media suggest that infrastructures projects in Saudi Arabia have been put on hold while thousands of workers, including Pakistanis, lost jobs. Remittances from Saudi Arabia dropped by 8pc during the quarter under review.

“Repatriation of profits and dividends of almost $2bn, external debt servicing on existing loans and disappearance of Coalition Support Funds inflows would amplify. The current account deficit should be filled by non-debt-creating flows such as FDI [foreign direct investment], failing which we’d have to draw down our reserves,” Dr Ishrat Hussain, former governor of the State Bank, wrote recently.

In the July-September quarter, exports of services also dropped to $1.137bn from $1.744bn a year ago.

Though the government has said goodbye to the International Monetary Fund, it is still bent upon to improve reserves with floating of debts in the international market. The government issued $1bn sukuk (Islamic bonds) at 5.5pc interest rate in the first week of this month.

Published in Dawn, October 21st, 2016