C/A deficit rises to $2bn

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KARACHI: The current account deficit has risen for the third consecutive quarter (Jan-March) of this fiscal year.

The State Bank reported on Thursday that the total current account deficit at the end March rose to $2.173 billion, much higher than $1.2bn noted during the same period last year. The trend could create problems as government has been borrowing from international market to meet external obligations.

Over $2bn deficit means zero impact of borrowing of $2bn through Eurobond.

During Jan-March, the deficit was $416 million while in the previous quarter of October-December it was $551m. Only the first quarter deficit was $1.2bn.

The current account was in the surplus in February by $167m, but it could not make the third quarter results in surplus.

Exporters believe that depreciation of dollar by 10 per cent in a few months could also cause drop in exports and the last quarter (March-June) could reflect the impact of dollar deprecation.

However, details of the current account deficit explain that real difference was noted in balance on trade in services while imbalance on goods in trade slightly increased.

Although deficit on goods in trade was too big compared to services, the current account deficit reflects the change in services exports.

According to the SBP export of services fell to $3.722bn during first nine months of this fiscal year compared to $5.432bn in the corresponding period last year.

The deficit on goods in trade during the nine months was $12.081bn, which increased by $496m compared to last year.

Analysts have been warning that higher current account deficit would nullify the entire efforts to improve borrowing for reserves and stabilise the exchange rate.

The finance minister recently said that the country’s foreign exchange reserves rose to $11.67bn after inflows of $2bn from Eurobond.

Bankers said the deficit of $2 to $3bn at the end of current fiscal year would not jolt reserves of the country or the exchange rate, but decline in deficit would certainly help country improve its ability to pay back foreign obligations.

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