February deficit shows challenging BoP position: analysts

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KARACHI: Pakistan’s current account balance has posted a deficit of $700 million during the first eight months of the current fiscal year as against a deficit of $3.23 billion in the corresponding months of the last fiscal year, the State Bank of Pakistan (SBP) announced on Monday. The current account deficit widened each month. It grew by 89 percent in February 2013 to $596 million against a deficit of $315 million in January 2013, according to balance of payment (BoP) data issued by the central bank.

Analysts have said that the sharp rise in the deficit each month indicates the challenging BoP position that would exert pressure on foreign exchange reserves and the local rupee in the remainder of the current fiscal year. They said that uncertainties about the external inflows in the country would be increased by the upcoming general elections and a change of government.

“The rise in current account deficit in February reflects further pressure on the foreign exchange reserves position,” said Mohammad Sohail, CEO Topline Securities. “The uncertainties surrounding a new IMF loan programme may also hit the value of the rupee,” he added.

Pakistan’s liquid foreign exchange reserve dropped by $239 million – from the previous week’s $12.804 billion – to $12.565 billion by the week that ended on March 8.

The reserves were depleted by the latest repayment to the IMF, which was released on February 26 and amounted to $391.8million. This was the10th installment under the IMF Stand-By Arrangement (SBA) facility. With this, Pakistan has repaid a total of $3.232 billion to the IMF since July 2012.

Analysts said that additional repayments scheduled in the coming months would further squeeze the foreign exchange reserves position. The next installment under the IMF SBA facility is due by the end of May 2013.

The foreign exchange reserves hit a record high of $18.313 billion by the week that ended on July 30, 2011.The IMF said that the mission had received no formal request from Pakistan for a new loan programme and to support the BoP situation.

The deficit in the eight month current account balance is much lower than the deficit in the same months of the last fiscal year. Analysts have attributed this to a reduction in the trade deficit and improved inflows of remittances.

“The encouraging remittances inflows and easing trade deficit helped the current account to post lower deficit from July 2012 to February FY13,” said Director, Arif Habib Corp, Ahsan Mehanti.

Pakistan’s trade deficit has eased by 10 percent to $13.18 billion from July 2012 to February 2013 in comparison with a deficit of $14.66 billion in the corresponding period of the last fiscal year. The exports posted five percent growth and imports fell by 2.4 percent in the period under review.

“The decline in global oil prices resulted in the shrinking of the value of imports,” said Mehanti.On the other hand, overseas Pakistani workers remitted an amount of $9.23 billion in the first eight months of FY13, showing a growth of 7.47 percent compared to $8.59 billion remitted in the corresponding months of the last fiscal year.


Courtesy: The News

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