It is unfortunate that current account (C/A) balance of the country is deteriorating almost consistently. According to the latest data released by the State Bank on 20th December, 2017, current account deficit has surged by 91 percent or dollar 3.059 billion to reach dollar 6.43 billion during July-November, 2017 as compared to dollar 3.371 billion in the same period of last year. A detailed analysis revealed that cumulative deficit of goods, services and income soared by 26 percent to stand at dollar 16.166 billion during the first five months of the current fiscal year as against dollar 12.784 billion in the same period of last year. With dollar 9.788 billion of exports and dollar 21.88 billion of imports, country’s goods’ deficit rose to dollar 12.093 billion in July-November of FY18 as against dollar 8.992 billion in the corresponding period of last year. Services deficit was dollar 2 billion with dollar 2.1 billion of exports and dollar 4.2 billion of imports while income sector deficit stood at dollar 1.977 billion with dollar 256 million of receipts and dollar 2.23 billion of payments. On monthly basis, C/A deficit was dollar 1.436 billion in November, 2017 as against dollar 1.296 billion in October, 2017. It may be mentioned that current account posted a record deficit of over dollar 12 billion in FY17, up 148 percent on the back of widening trade deficit and a slowdown in remittances. If the present trend continues, current account deficit may set another record and exceed dollar 15 billion mark during FY18.

The latest data on C/A deficit is certainly disturbing for a number of reasons as it could have severe implications for the level of foreign exchange reserves of the country, value of the rupee, investor confidence, industrial and commercial activity, inflation, credit rating of the country, etc. The government has recently taken several measures to increase exports and contain imports to bridge the widening gap in the external sector. These include imposition of a regulatory duty on non-essential imports and devaluation of Pak rupee but these measures have not shown any results so far as imports have increased at double the rate of exports. The SBP has also initiated the Aasan Account Scheme for expatriates to improve the flow of remittances but, given the level of C/A deficit, these initiatives may not yield the desired results. In our view, the government needs to work harder and take the right initiatives to reverse the deteriorating trend in the current account balance. For this, exports have to be increased considerably by improving the growth rate of economy and letting the rupee find its true value in the market freely in order to increase Pakistan’s competitiveness in the international market. Imports have to be curbed so that their growth rate is less than exports’. It is good to see, however, that the official and unofficial rates of the rupee against dollar are almost identical after the recent devaluation. This will improve the flow of remittances through the banking channels and serve to increase home remittances. The problem with the present government is that it does not want to undertake bold and harsh measures before the next elections in order to avoid unpopularity. Such a short-term approach is not helpful to preserve the country’s external solvency on a lasting basis and accelerate the growth process with monetary stability in the country.