Since 2000, the worldwide economic situation has been characterized by large global imbalances, in mainly elevated surpluses in the rapidly industrializing Asian states (notably China) and in northern Europe (Germany), paired with a large deficit in US. As the International Monetary Fund (IMF) has presently recorded in its 2017 external sector report, the persistence of large current account surpluses has been a previously unusual feature of the worldwide economy over the last 15 years. The IMF recorded that of 15 advanced states that had external surpluses during 2002, 12 still had them in 2008 and 11 still had them during 2016. In several instances, the surpluses have grown larger.
On the other hand, Pakistan’s external account recorded a current account deficit of less than a billion dollars for the second consecutive month in September 2017. The country’s current account deficit increased to $3.6 billion in the first three months of the present fiscal year, FY18, as compared to $1.6 billion in the corresponding period of last fiscal year, FY2017.
Economic advisors mentioned that the current account deficit during the month of September 2017 was reported at $956 million, as against to $550 million of August 2017, chiefly because of lower remittances. They further said that current account deficit rose to 4.2 percent of gross domestic product (GDP). Trade deficit during September 2017 remained flat at $2.2 billion. Both exports and imports fell by 1117 percent and 8 percent to $1.7 billion and $3.9 billion respectively. The fall was chiefly because of lower number of working days in the month. The current account, broadest measure of trade, covers flows of goods, services and investment. The current account is a significant indicator of economy’s health. The overall balance of payment, which adds financial account and capital account, stayed in the red, reaching at $761 million in September 2017.
Petroleum imports on PBS rose by 34 percent yearly whereas petroleum imports on SBP rose by only 12 percent yearly in Sep-2017, which can be showed by timing difference between customs clearance and payments or IDB’s oil facility wherein the lender makes a payment directly to the oil supplier. Nonetheless, national accounts continue to reflect lower international oil prices with realized crude oil import price averaging only USD 41/bbl in Sep-2017 (PBS) as against to Arab Light price average of USD 54/bbl for the month. Hence, petroleum imports could witness sharp inflation in ensuing months as higher oil rates flow through the accounts while demand continues to stand strong.
Reliance on high cost commercial borrowings has grown lately amid rising need for inflows to keep FX reserves close to USD 20 billion mark. Short term disbursements have grown by 66 percent yearly to USD 544 million in 1QFY18. PKR stability at the cost of mounting external debt has been fuelling economic growth with unsustainable roots. Promotion of exports through rebates adds to fiscal deficit. Imposition of regulatory duties aimed at curbing imports amid sky high taxation actually promotes industrial/corporate inefficiencies at the cost of consumer benefits by raising costs for consumers and reducing domestic savings.
The government officials showed that the main products of exports during September, 2017 were knitwear (Rs.21,948 million), readymade garments (Rs.19,952 million), bedwear (Rs.19,236 million), cotton cloth (Rs.18,898 million), cotton yarn (Rs.11,641 million), rice and others (Rs.7,174 million), towels (Rs.6,681 million), madeup articles (excl. towels & bedwear) (Rs.5,730 million), fish & fish preparations (Rs.4,223 million) and surgical goods & medicinal instruments (Rs.3,114 million).
The officials also mentioned that the main commodities of imports during September, 2017 were petroleum products (Rs.72,738 million), petroleum crude (Rs.29,839 million), power generating machinery (Rs.21,352 million), plastic materials (Rs.19,539 million), iron & steel (Rs.19,039 million), electrical machinery & apparatus (Rs.17,395 million), palm oil (Rs.15,871 million), natural gas, liquefied ( Rs.13,752 million), iron & steel scrap (Rs.12,435 million) and medicinal products (Rs.8,869 million).
BALANCE OF TRADE
Based on the provisional statistics of imports and exports the balance of trade in September, 2017 was (-) 2,798 million in US $. The balance of trade statistics cumulative from July-September, 2017 were (-) 9,088 million US $.