Current Account Deficit Maintains Huge Gap of 210% in July

The growing expense of the imports and the low receipts of foreign exchange continued to show a huge deficit in the current account which projected a gap of 210 percent in the first month of financial year 2017-18 when compared with the same month of last year.

According to the State Bank of Pakistan (SBP), the current account deficit swelled to $2.053 billion in the month of July 2017, which was standing at $662 million in the same month of last year. The current account (CA) continues to maintain its huge deficit even in the first month of the current financial year, which showed a growth of 210 percent compared with the same period last year.

Factors of Higher Current Deficit

The receipts of exported goods were higher at $1.809 billion in July 2017 as compared to $1.495 billion in July 2016, showing a double digit growth of 21 percent.

On the other hand, imports bill of goods was quite huge in July, recorded at $4.696 billion as compared to $3.113 billion, depicting an increase of 59.6 percent year-on-year.

The imbalance of payments between exports and imports stood at $2.887 billion in July. Besides, the imbalance of service trade stood at $ 489 million in July 2017.

Resources such as remittances also rose, which was pegged at  $1.54 billion in July 2017 from $1.328 billion registered in July 2016, up 16 percent.

According to analysts, the deficit of the current account is staggeringly high, posing a challenge to economic managers to contain the situation that could negatively impact various factors of the economy on a microeconomic level.

The deficit due to the continuation of machinery imports both for CPEC and non-CPEC related energy and infrastructure projects, whereas, imports for plant up-gradation under the ongoing export package for the textiles sector also added pressures.

In the outgoing financial year 2016-17, Pakistan’s current account deficit has increased by more than 3 times during fiscal year 2017, reaching US $ 12.098 billion currently. This is the 2nd largest current account deficit Pakistan has seen during the last 14 years.

The current account deficit has been managed by foreign exchange reserves and with a financial account surplus.

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