Karachi: The country’s current account deficit remained $2.2 billion despite higher dollar inflows and low oil prices during 2014-15, the State Bank of Pakistan (SBP) reported on Wednesday.
The deficit was significantly less than the preceding fiscal year’s $3.1bn, but in the wake of record $18.5bn remittances sent by overseas Pakistanis and a 40-50 per cent fall in oil prices during the year under review, it was expected that the country’s current account would not be in deficit.
Data showed that the country during the first 11 months of the last fiscal year spent $11.158bn on import of petroleum products saving about $2.4bn compared to the corresponding period of preceding fiscal year. However, this saving could not help to reduce the trade gap since the imports remained close to size of preceding year’s level.
The State Bank reported that trade deficit increased to $17.039bn in 2014-15 compared to $16.59bn in 2013-14.
Incentives offered failed to prop up the country’s exports. Exporters claimed that the international market was dull and they had to sell their products at cheaper prices.
Many analysts blame policy makers for the persistent current account deficit in the presence of 16.5 per cent growth in remittances along with regular inflows from the IMF and other lending agencies.
The country’s foreign exchange reserves have soared to $18.6bn mostly through borrowing which will certainly increase the size of debt-servicing. In FY15 the size of debt-servicing was around the level of preceding fiscal year’s $7bn.
Another major reason for the current account deficit was the steep fall in the foreign direct investment.
The State Bank in a recent report stated that the FDI in FY15 fell by 58 per cent to around $709 million refuting the government’s tall claims of its success on external fronts.
In the last two months — May and June — of the previous fiscal year, the net FDI remained negative, reflecting reluctance of foreigners to invest in Pakistan, while the government heavily relies on expected Chinese investments. The Chinese investment in FY15 was less than $300 million.
The government has signed $45bn agreements with China hoping to see major inflows from the neighbouring country this fiscal year.
Analysts said the government should not adopt single-track strategy for the foreign investment which will put Pakistan at the mercy of Chinese investment while others will leave this country.
