ISLAMABAD: Ballooning current accounts, trade deficits and other external imbalances are adding to the economic woes of the new Pakistani government, which still has to come up with immediate policies and a long-term vision to stem the tide of worsening indicators. Pakistan’s Current Account Deficit (CAD) widened to an all time high of $13 billion in the 11 months to May of the current fiscal 2008. By the time the fiscal ends on June 30, the country’s CAD will widen more. Trade deficit widened to a record $18.756 billion — up 52 percent, compared to $12.311 billion in the same period of 2007.
Since year-end statistics are yet to be released, it may widen to $21 billion by June 30. Trade deficit in the full fiscal 2007 was $13 billion.
Pakistan has projected CAD at $12.7 billion, which is 7.7 percent of GDP, for fiscal 2009 that begins on July 1.
But it is unlikely to be contained at that level, given the economy’s present woes, which includes slow export growth and a question mark over investment and aid inflows.
The government’s concerns have been multiplied as the oil import alone has skyrocketed to $10.094 billion in the 11-months to May, 2008 — up 52.21 percent compared to $6.631 billion in the like period of 2007 fiscal. It is estimated to hit $13 billion by June 30, the Federal Bureau of Statistics reports. Oil rose to 28 percent of overall imports this year, compared to 23 percent in 2007. It, alone, is responsible for a 40 percent growth in total imports. Other key imports were: machinery, telecom equipment, textile machinery, farm inputs, chemicals and food, including wheat and palm oil.
Exports rose 11.37 percent to $17.186 billion in the 11 months to May, 2008, up from $15.432 billion in the same period of 2007. The government’s full year projection for 2008 is $19.2 billion. Exports in 2009 are projected to grow 16 percent to $22.9 billion. Much of the attainment of the target will depend on how far the industry can grow in spite of the continuing power outages and natural gas shortages, and whether the current political turmoil subsides or flares up more.
There is good news for exporters of farm inputs to Pakistan. The government has withdrawn sales tax from pesticides, fertilizers and agricultural implements. “There will be no customs duty on agricultural inputs,” Prime Minister Yousuf Raza Gilani has announced as part of his efforts to boost the farming sector, and ensure more food and industrial raw materials including cotton, for the industry and exports.The government, or more importantly the private sector, will have to do more to check the trade deficit of the services sector. Its deficit stood at $6.098 billion in the 11-months to May, 2008 — a 43.48 percent widening in the like period of 2007.