The 3 Week Diet System

Wednesday, February 5, 2014

Pakistan enjoys current account surplus with US, EU

February 06, 2014 

KARACHI: Pakistan runs a largest current account surplus with the United States and European Union while China, middle-eastern and palm oil exporting countries continue to push Pakistan’s current account into huge deficit, reveals a recent report by the State Bank of Pakistan.

The SBP data shows alone during the first half of the current fiscal year, total export receipts from United States increased to more than two billion dollars against $1.9 billion in the same period last year. Comparatively, Pakistan imports from the US totalled $561 million against $403 billion.

From the US, Pakistan’s imports are limited: mainly American cotton, gas, turbines, worn clothing, metal scrap and powdered milk.

From EU too, foreign inflows are higher than outflows, since Pakistan relies on these countries mainly for textile and oil refining machinery, metals and turbines. Conversely, the export receipts from China stood at $1.4 million, while Chinese imports for the same period amounted to $2.9 billion.

The report notes the share of the US in overall forex inflows was the biggest at 21 percent, followed by EU 22 percent in FY12. The outflow from the US and the EU countries was reported at eight and 14 percent, respectively. China contributed only three percent in the forex earnings and 10 percent in outflows, putting pressure on the external current account balance.

According to the report, Pakistan’s foreign exchange earnings rely heavily on textile exports and inward workers’ remittances.

These earnings are concentrated in three regions, namely the US, EU and gulf countries, as financial inflows and other exports from the other countries remained low.

The report said that while earnings from the US and EU are almost equally divided between exports receipts and workers’ remittances, earnings from the gulf countries were mainly comprised of remittances.

Inflows from the Middle East are more than offset by outflows in the form of oil payments to Saudi Arabia and UAE, it said.

Textiles and the leather are the only two major categories where Pakistan has trade surplus while in all other broad trade categories, the country is running deficits.

This dependency makes the forex earnings vulnerable to changes in cotton prices globally as well as performance of the domestic crop.

The report said dependence on imported oil and other essential commodities such as, food items, fertilisers, machinery etc is another factor that makes external account weak.

In Pakistan, the trend in trade balance closely follows the movement in oil prices, mainly because over a quarter of import bill is comprised of petroleum imports, and there is significant amount of volatility in these imports compared with non-oil imports.

In addition to trade account, services account is also at risk of oil prices as transportation (freight charges) forms the largest part of the services account of the country, said the report.


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