KARACHI: Pakistan’s current account deficit widened to $18 billion or 5.7percent of gross domestic product during the last fiscal year of 2017/18,putting rupee at risk of a further big fall and fanning fears about thesustainability of the economic growth.
The State Bank of Pakistan (SBP) said the current account deficit amountedto $12.6 billion or 4.1 percent of GDP in FY2017. Economist Ashfaque Khansaid the new government would need to find a way to finance the gap.
“… (It may) go to the IMF (International Monetary Fund) to obtain a freshbailout in late August or in early September,” Khan said. His calculationfor the current account deficit for the current fiscal year is $21.2billion. “The external financing requirement is expected to be more than$31 billion,” he added.
SBP data showed that trade deficit widened to $31.074 billion in FY2018from $26.68 billion in FY2017 as exports of goods recovered to $24.772billion from $22.003 billion, while imports rose to $55.846 billion from$48.683 billion.
The current account deficit narrowed to $1.8 billion in June from twobillion dollars in May. The full-year current account deficit was higherthan the State Bank’s forecast for FY2018. The SBP projected the deficit inthe range of four to five percent of GDP during the last fiscal year.
Analysts said the deficit has reached the unsustainable level especiallywhen the economy is burning through around $1.5 billion a month and foreignexchange reserves fell to cover less than two months of imports. Thecentral bank’s reserves stood at $9 billion as of July 13.
Mohammad Sohail, chief executive officer of Topline Securities said thecurrent account deficit was higher than the initial estimates. “Governmentshould take steps to curtail imports,” Sohail said.
The deteriorating external current account pushed the local currency lowerby a cumulative 20 percent since December last year. SBP data showed thatthe country paid $4.11 billion in debt repayments during the last fiscalyear as compared to $4.374 billion a year ago.
IMF projected that Pakistan’s external debt and liabilities could peak to$144 billion in the next five years from $93 billion in fiscal 2018. Meagergrowth in workers’ remittances and foreign direct investment and increasingforeign debts are aggravating the balance of payments position.