Ministry
of Finance spokesman said here Wednesday that a
report recently released to the media by an international financial
institution, has pointed to increased vulnerability of external account and
risk to macroeconomic stability given the widening current account deficit. The
report has projected gross external financing needs of Pakistan at 9% of GDP
i.e. $31 billion for the fiscal year 2018. The gross financing requirements
have been worked out by taking into account the portfolio investment of 4% of
GDP i.e $13.8 billion. The report has further projected deterioration of the
external sector in current fiscal.
The spokesman said that the report
is based on misinterpretation of standard definition of the gross financing
needs of the country. The report is also a misstatement of performance of
external account for the two months of current fiscal year. As per the
international reporting standards, portfolio investment is not included while
calculating the gross financing needs of a country. As per international
standards, a country’s gross financing need is an aggregate of current account
deficit plus debt servicing of the year. Based on this standard, Pakistan’s
gross financing need for 2017-18 is about $18 billion (5.3% of GDP) rather than
$31 billion (9% of GDP) as mentioned in the said report. As of Sept.2017, the
total portfolio investment is $6.6 billion. i.e. 1.94% of GDP rather than $13.8
billion (4% of GDP). Again it is a misstatement of facts.
The spokesman added it is pertinent
to mention here that the report itself has pointed out that “improving the
external balance hinges upon the revival of exports, slowdown in imports
and stable remittance flows”. This is precisely what has been achieved in the
first two months of current financial year, i.e. exports and remittances have
improved and imports have slowed down.
Exports during July-August 2017-18
stood at $3.93 billion as against $3.34 billion the same period of last year
showing a growth of 17.7%. The items showing increase in exports during July-August,
2017 are rice 20%, textile group 7% and other manufacturers 21%. Much of this
growth is coming from value added sectors.
The spokesman went on to say imports
during July-August, 2017-18 stood at $8.996 billion as against $9.738 billion
over the preceding year (May-June 2016-17). Thus growth in imports has shown
deceleration of 7.6% over the preceding two months.
Workers’ remittances during July-
August, 2017-18 stood at $3.50 billion as against $3.09 billion during the same
period of last financial year, showing an impressive increase of 13.2%. Growth
in remittances is coming from USA, UK, Saudi Arabia and UAE. Foreign Direct
Investment during July-August, 2017-18 stood at $457 million as against $179
million in the same period of last year, showing a massive increase of 154.9%.
As a result of improvement in these
key economic indicators, the current account deficit during July-August, 2017
stood at $2.60 billion as compared to $3.10 billion in May-June, 2017 showing a
substantial improvement of 16.2%. With these positive trends strengthening in
coming months, current account deficit would improve significantly which will
also improve FX reserves of the country.
The spokesman said that while
external account has shown strong performance in the first two months of
current fiscal year, misinterpreting data to deliberately paint negative
picture is uncalled for.
