A State Bank of Pakistan report says that the country was facing $58 million current account deficit during the first two months, July and August, of the last financial year which increased to $1.372 billion during the current financial year. However, the current account deficit during the first six months of the current fiscal year, could increase to $1.58 billion as compare to a deficit of $83 million in the corresponding period of the last fiscal year. The current account deficit indicates the measurement of a country’s trade in which the value of goods and services it imports exceeds the value of goods and services it exports.
There can be several reasons for the deficit — one of which is devaluation of the Pakistani rupee which has been losing its value against dollar for the last six months. As a result, the depreciation of the rupee has increased import bill and in this situation, the State Bank can revise its monetary policy in the coming months. Another reason could be increase in imports and decrease in exports as exports remained $3.7 billion against imports of $7.9 billion.
It is unfortunate that exports form the country could not pickup despite the fact that Pakistan has been granted Generalised System of Preferences Plus status by the European Union. Another reason of export decline can be attributed to energy crisis and uncertainty prevailing on the political horizon in the country. Some government policies also encourage businessmen to opt for importing goods, affecting the trade balance. The country is also facing decline in the direct foreign investment, but the economy is getting a lease of life by inflow of remittances sent by the Pakistani expatriates. Floods are also posing a threat to the already fragile economy as has been indicated by the State Bank of Pakistan. As the government has also spelled out many times, the energy crisis and law and order are affecting trade and business activities in the country. Only a few years ago Pakistan was offering India to purchase electricity from Pakistan, but what happened overnight — which had turned the table — is still a mystery.