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Pakistan's current account deficit improves to $2.14b

ISLAMABAD — Pakistan's current account deficit has improved by $607 million in the first quarter of 2007-08 and stood at $2.145 billion as against $2.752 billion over the corresponding period last year.

Finance ministry statistics showed that current account deficit in the first three months (July-September 2007), as percentage of GDP, stood at 1.3 per cent of the projected GDP for the year as against 1.9 per cent in the same period last year.

Pakistan's trade balance has widened in recent years on the back of strong economic growth sustained by domestic demand.

The IMF in its recent report Regional Economic Outlook: Middle East and Central Asia said that despite the improvement in its economic performance, Pakistan still faces important challenges to curtail inflation and improve current account.

In particular, the annul inflation is still relatively high at around 7-8 per cent and the external account deficit has risen in recent years, reaching five per cent of GDP in 2006-07. Giving the need to upgrade the country's infrastructure and increase private investment to sustain high growth, reducing inflation and the current account deficit requires further efforts aimed at raising public and private savings.

According to statistics, exports (on f.o.b basis) have grown at an average rate of 5.8 per cent during the first three months of the current fiscal year, amounting to $4.355 billion as against $4.118 billion over the same period last year.

Last year exports grew by an average 3.3 per cent in whole year of 2006-07. Exports growth of 5.8 per cent in the first quarter of the current fiscal year is certainly an improvement over last year. Exports are targeted to grow by 8-10 per cent in the current fiscal year.

Imports, on the other hand, declined by one per cent during the same period, amounting to $6.755 billion as against $6.822 billion. Imports were up 8.2 per cent last year and grew at an average rate of 35 per cent during the previous two years — 2004-05 and 2005-06.

Import growth appears to be on the path of moderation and is expected to grow in the range of 6.5 per cent to seven per cent in the current fiscal year.

As a result of the developments on exports and imports the trade deficit improved by $304 million — improved from $2.704 billion to $2.4 billion during the year under review.

Adviser to finance ministry Dr Ashfaq Hassan Khan said the narrowing of trade deficit is the direct result of improvement in exports on the one hand and a marginal decline in imports on the other. He said improvement in the trade balance during the period under consideration is an encouraging development and will have salutary impact on the country's overall balance of payment.

Invisible balance maintained a surplus of $141 million during the July-September period of the current fiscal year as opposed to a deficit of $101 million in the same period last year.