Pakistan revises CAD target to 4.2pc of GDP

ISLAMABAD — Pakistan government has nearly doubled its revised target for Current Account Deficit (CAD) to 4.2 per cent of GDP, owing to higher than expected trade deficit and lower invisible account surplus.

By From Our Correspondent

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Published: Sun 26 Mar 2006, 9:50 AM

Last updated: Sat 4 Apr 2015, 3:39 PM

Finance Ministry sources said that revised target for current account deficit has been now been set at $5.137 billion against budgeted target of $2.7 billion for the current year, up by 90 per cent in absolute terms.

As percentage of GDP (Gross Domestic Product), the revised current account deficit has now been put at 4.2 per cent against budgeted target of 2.19 per cent, showing an increase of about 92 per cent.

The revised current account deficit of $5.137 billion for the current year is about 168 per cent higher than last year's $1.9 billion in absolute terms and 140 per cent higher than last year's 1.75 per cent of GDP last year.

These sources said the current account was surplus to the tune of 1.4 per cent of GDP in 2003-04 but turned into deficit and stood at 1.6 per cent of GDP in 2004-05. The current account deficit had amounted to 1.6 per cent of GDP in 1999 and then remained in surplus between 2000 to 2004.

According to revised estimates for the current year, the foreign exchange reserves are expected to reach $14.8 billion during as against $12.6 billion of last year, showing an increase of about 17.5 per cent.

The budget 2005-06 had estimated a reserve build up of $510 million but higher inflows as a result of earthquake related funds has raised this addition to $2.2 billion. The 17.5 per cent targeted increase in foreign exchange reserves is based on expectations of primarily higher privatisation and capital market proceeds and foreign aid inflows during the current year as compared to last financial year.

The sources said most of the budget estimates have been revised recently. The trade deficit which has already crossed $7 billion in eight months, according to official estimates, would be settle at around $6.6 billion at the end of the year as against budgeted target of $4.2 billion.

Similarly, amortisation of principal was originally estimated at $1.4 billion, which has been reduced to $1.04 billion. Under the revised estimates, the government expects to get a total of about $8.8 billion foreign exchange inflows against $4.9 billion received in fiscal year 2004-05, showing an increase of about 79 per cent.

These inflows include privatisation, grants, capital market proceeds, project and programme aid and foreign investment. The government estimates $1.645 billion in privatisation proceeds during the current fiscal year, compared with $363 million of last year. Grants this year would be $583 million compared with $231 million of last year.

Similarly, capital market earnings are expected to be $1.5 billion during the current fiscal year compared with $600 million of last year, up by about 150 per cent. Likewise, project and programme aid during the current year are estimated at $3.15 billion against $2.04 billion of last year, showing an increase of 54 per cent.

Moreover, foreign investment is estimated at $1.9 billion, up by more than 13 per cent of last year's $1.676 billion. Amortisation this year has been estimated at $1.04 billion compared with $1.43 billion of last year while other payments would amount to $6.6 billion compared with $4.69 billion of last year.

The foreign exchange reserves at $14.8 billion would, however, decline in terms of import coverage as these would be enough to fund imports for 30 weeks. Last year's $12.6 billion foreign exchange reserves were sufficient to meet 32.3 weeks of imports.



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