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Pakistani current account deficit widens 24 pct yr/yr

KARACHI - Pakistan's current account deficit widened 24 percent to $1.01 billion in July from a year ago, the central bank said on Wednesday, fuelling pressure on the country's depleting reserves and falling currency.

Analysts said while growth in the current account deficit in July was below a monthly average rate of $1.3 billion over the past nine months, the widening gap added pressure on authorities to find ways to pay for Pakistan's imports.

"The underlying trend suggests some moderation of pressure. It is not a bad beginning for fiscal year 2009," said Asif Ali Qureshi, an analyst at Invisor Securities.

"However, its financing is becoming more challenging with inflows slowing due to rising political uncertainties and the deterioration in the overall economic condition of the country," he said.

July is the first month of Pakistan's 2008/09 (July-June) fiscal year. The current account deficit last July was $816 million, the central bank said.

It expects Pakistan to have a record current account deficit of between 7.3 percent to 7.8 percent of gross domestic product (GDP) this fiscal year.

Based on official estimates that Pakistan's GDP is worth 12,280 billion rupees ($164.2 billion) this year, the size of its current account deficit at the top end of the central bank's forecast is worth about $13 billion, Invisor's Qureshi said.

High oil prices have depleted Pakistan's foreign exchange reserves to levels worth less than three months of imports.

Given that political turbulence has slowed foreign investment, and the government is also running a budget deficit partly funded by borrowing from the central bank, investors are worried Pakistan cannot pay for its imports.

This has dragged on the rupee which has lost about a fifth of its value against the dollar this year. Pakistani shares are also hovering at two-year lows.

Pakistan's shares fell nearly 4 percent on Wednesday as investors sold blue chips amidst uncertainty whether the coalition government's parties can work together to tackle pressing economic issues.