July-Nov c/a deficit narrows to $1.359bn

Friday, December 18, 2009
KARACHI: Pakistan’s current account deficit in the first five months of the 2009/10 fiscal year was a provisional $1.359 billion compared with a deficit of $7.318 billion in the same period last year, the central bank said on Thursday.

Higher remittances and a lower trade deficit compared with last year were the reasons for the narrowing of the current account deficit, analysts said.

According to the latest official data, remittances from Pakistanis working overseas rose 29.18 per cent to $3.83 billion in the first five months of this (July-June) fiscal year.

The trade deficit fell to $986.51 million in November, compared with $1.18 billion in November last year.

The trade deficit for the first five months of the 2009/10 fiscal year narrowed to $5.47 billion from $8.77 billion in the same period last year.

“While a reduction in the trade deficit is reducing the external account deficit, it also signifies a sharp reduction in economic growth,” said Asif Qureshi, director at Invisor Securities Ltd.

Pakistan’s economy is in virtual recession as gross domestic product growth in the 2008/09 fiscal year of 2 per cent is about the same as population growth. The IMF has projected gross domestic product growth flat at 2 per cent this fiscal year.

Pakistan recorded a provisional current account deficit of $275 million in November, the bank said.

“A sustained improvement in the external account position would create room for further monetary policy easing,” Qureshi said.

The central bank last month cut its policy rate by 50 basis points to 12.5 per cent.

Pakistan entered a $7.6 billion emergency International Monetary Fund (IMF) programme in November last year to avert a balance of payments crisis.

The loan was increased to $11.3 billion in July, of which the IMF has disbursed more than $5 billion.