KARACHI: The recovery in global economy has impacted the country positively with higher exports growth while at the same time, it provides support to worsening current account deficit.
The Economic Survey 2017-18 released on Thursday said the country’s balance of payments remained under stress due to rising imports of capital equipment and fuel during the first nine months of the outgoing fiscal year.
The current account deficit surged by 50.5 per cent to $12 billion (3.8pc of GDP) during the July-March period. This was mainly due to 20.6pc widening in the trade deficit, which amounted to $22.3bn.
The trade deficit is rising mainly due to a 16.6pc increase in the import bill to $40.6bn which overshadowed the increase in exports and workers’ remittances, said the survey.
The import bill recorded a decline during the first quarter of this fiscal year and then started climbing in the second quarter “thus showing that cushion of low international prices has ended now.”
According to the survey report the increase in machinery group is mainly due to power generation equipment corresponding CPEC-related activity in power and infrastructure development. The surge in machinery and POL imports ‘bodes well for overall economic activity.’
“Recovery in global oil prices also played a role in pushing up the import bill. The remarkable growth in exports earnings and remittances inflows was not sufficient to overcome the widening current account gap,” said the survey.
It said the higher current account deficit was largely caused by the widening of trade and services account deficits.
Import bill surged by 16.6pc during July-March period of this fiscal year compared to last year, on account of higher oil imports whereas non-oil imports are on decline from second quarter compared to the first quarter.
Portfolio investment is dominated by official inflows, after realisation of floating of sukuk and eurobond worth $2.5bn in December 2017, said the survey.
“Pakistan needs to improve its position in doing business as the country falls behind most of its regional peers,” said the report, adding that the World Bank’s Doing Business Report 2018 ranked Pakistan 147th out of total 190 economies, behind Bhutan (75th), India (100th), Nepal (105th), Maldives (136th), Sri Lanka (111th), only ahead of Bangladesh (177th) and Afghanistan (183th).
Nationalisation of jobs and introduction of value-added tax in Saudi Arabia has reduced remittances from the kingdom. Also the UAE increased the cost of living for unskilled low-income workers. The overall decline in unskilled occupation is 28.51pc during July- December period of 2017-18 compared to same period last year, said the survey.
With a growth of 3.6pc in remittances during July-March the government expects to achieve the target of $20.6bn for FY18, it added.
Published in Dawn, April 27th, 2018
