KARACHI, Oct 20: Pakistan’s current account balance rose around nine per cent or $61 million to $756 million in the first two months of this fiscal year from $695 million in the same period of the last fiscal year.

The latest balance of payment statistics available on the State Bank website shows that the country booked higher current account balance primarily because it saw lower deficits in the services and trade accounts.

The deficit in the services account fell to $198 million in July-August 2003 from $311 million in July-August 2002, and the trade deficit came down to $65 million from $107 million.

The narrowing of the trade deficit can be attributed to a 10.5-per cent growth in exports that was substantially higher than a 7.6-per cent growth in imports. In the first two months of this fiscal year, free-on-board exports rose to $1.930 billion, up from $1.746 billion in a year-ago period. But free-on-board imports went up to $1.995 billion from $1.853 billion.

Similarly, in the services’ account, negative inflow of investment income was lower at $226 million in the first two months of this fiscal year than $307 million recorded in the same period of the last fiscal year.

Had Pakistan not been able to contain deficits in trade and services accounts, a sharp fall in workers remittances, that forms part of current transfers, would have made it too difficult for the country to achieve a current account surplus. The statistics show that workers’ remittances, or foreign exchange sent back home by overseas Pakistanis, fell to $588 million in July-August 2003 from $700 million in July-August 2002.

In the fiscal year July-June 2002-03, Pakistan had achieved a huge current account balance of $4.02 billion, up from $2.83 billion in the fiscal year 2001-02 primarily because workers’ remittances had shot up to $4.2 billion from $2.4 billion — showing a massive $1.8 billion or 75 per cent increase.

Bankers handling workers’ remittances say total remittances in the full fiscal year are bound to show a decline as one-off large panic-transfers seen after the fateful September 11, 2001 terrorist attack on the US have slowed down. Another thing that makes them pessimistic is that overseas Pakistanis in the US and the UAE now find it difficult to remit large sums of money back home because of intense probing by the authorities there, to cut financial supply-lines to terrorists operating in this region.

Fears of an overall fall in workers’ remittances during this fiscal year are apparently real because the country has already witnessed a drop of $152.7 million or 14.6 per cent in the remittances in the first quarter. Workers’ remittances in July- September 2003 fell to $890.3 million from $1.043 billion in July-September 2002.

Now, if workers’ remittances fall sharply during this fiscal year, this will surely lower the current account surplus because the economic managers are not anticipating huge net surpluses from other heads of current transfers.