KARACHI: The current account deficit increased 90.7 per cent year-on-year to $6.43 billion in the first five months of 2017-18.
Pakistan
witnessed a record current account deficit of $12bn in the last fiscal
year. But the trend in recent months shows the deficit is likely to
surpass that of 2016-17.
The State Bank of Pakistan (SBP)
reported on Wednesday the current account deficit for July-November
grew by $3.06bn over a gap of $3.37bn recorded a year ago.
The
SBP governor recently expressed concerns about the increasing financing
gap that could force the government to approach either commercial
markets or the International Monetary Fund (IMF) to improve foreign
exchange reserves.
Pakistan recently raised $2.5bn from commercial markets through the auction of international bonds.
Exports
during the five-month period increased by 12pc or $1bn. But imports in
the same months jumped by 23.4pc or $4.15bn. Rising imports did not
reflect the impact of the regularity duty that the government imposed
recently on a number of foreign items to cut the import bill.
The
move was widely criticised by importers who claimed that the duty was
imposed on imported raw materials instead of luxury items.
In
the first quarter of 2017-18, the average monthly current account
deficit was $1.23bn, which increased to $1.36bn for October and
November. This indicates the deficit is increasing each month.
The
government has been struggling to improve exports by providing
exporters with incentives and depreciating the local currency. The rupee
has depreciated by about 8pc since the beginning of the new fiscal
year. Exporters were of the view that the 5pc depreciation that took
place recently could result in increased exports in the next three
months.
However, the sudden downward revision in just
seven working days invited criticism from importers. They claimed it
would be counterproductive because imported components of exportable
products would make them costlier. But textile exporters said exports
would benefit from the depreciation.
The trade imbalance
in goods increased over $3bn during the five months. It reached $12.09bn
compared to $8.99bn in the corresponding period in the last fiscal
year.
In the absence of any significant growth in
remittances, the current account deficit can hurt the country’s ability
to meet foreign debt obligations as well as the exchange rate stability.
The SBP said the market mechanism will determine the exchange rate
going forward.