KARACHI: The current account deficit further widened in first four months of this fiscal year emerging as a major threat to already poorly managed economy.
The State Bank on Wednesday reported that the current account deficit for July-October period rose to $1.366 billion mainly due to poor performance of trade and services sector, against a surplus of $14 million in the corresponding period last year.
The country has been struggling to avert default-like situation amid fast depleting foreign exchange reserves and the PML-N government secured a credit line from the IMF, but the unexpectedly meagre first tranche dashed hopes to rescue the economy, while the rupee witnessed steep fall against the US dollar.
According to the State Bank report, the combined deficit of goods and services trade rose to $6.779bn in the July-Oct period. While the services sector posted $755m deficit compared to $212m in the corresponding period.
Analysts believe the current account deficit would widen in the coming months as the inflows are not sufficient to stop this soaring deficit.
Pakistan expects to receive about $500m next month under the IMF’s $6.6bn Extended Fund Facility (EFF).
Bankers said the dollar outflows could further squeeze the forex reserves. The country’s reserves are slightly over $9bn while the holdings of the State Bank are just $3.8bn.
Holdings of the private banks have increased to over $5.2bn, much higher than the State Bank reflecting the rising confidence of general public on US currency instead of local currency.
Currency experts said the deal with IMF failed to give any boost to the economy and weak reserves pushed the rupee further down to Rs108 and Rs109 against the dollar in the inter-bank and open markets.
The State Bank’s report showed that export slightly increased but the volume of import increased substantially during the period under review to widen the current account deficit.
Pakistan now depends largely on remittances being sent by the overseas Pakistanis to meet the ever increasing deficit. The country on average receives $1.3bn remittances per month.