Current Account deficit widens 59pc to $7.413bln in first half

[SunilM]

C/A deficit widens 59pc to $7.413bln in first half

KARACHI: Pakistan’s current account deficit rose 59 percent in the first half of FY18 due to high imports relative to exports, State Bank of Pakistan data showed on Friday.

The July-December FY18 current account deficit widened to $7.413 billion. That was wider than the $4.660 billion in the corresponding period a year earlier. However, the current account gap narrowed to $1.130 billion in December from $1.441 billion in the previous month.

The trade deficit surged 24.50 percent to $17.963 billion during July-December FY18.

Exports rose 10.8 percent to $11.776 billion in the first six months of FY18, while imports stood at 26 billion, depicting 18.8 percent increase over the same period of last year, according to the central bank figures.

The SBP’s first quarterly report published on the same day stated that mounting burden of imports exacerbated the pressure on the country’s balance of payments.

Payments related to the import of petroleum, machinery, metal, and transport were particularly heavy during July-September FY18.

“Financing the deficit proved to be a challenge. While foreign direct investment posted significant YoY growth, foreign investors in the equity market seemed particularly sensitive to brewing uncertainty over the political climate as well as the exchange rate outlook,” the central bank said.

“More importantly, the bulk of loan inflows were utilised to honour debt repayments due in the quarter. Consequently, funding the current account deficit led to a decline in the country’s foreign exchange reserves,” it added.

The central bank’s foreign exchange reserves fell $284 million to $13.699 billion during the week ended January 12.

The State Bank predicted that the current account deficit would be 4.0 to 5.0 percent of gross domestic product during FY18.

https://www.thenews.com.pk/print/270513-c-a-deficit-widens-59pc-to-7-413bln-in-first-half

 

[shootingstar]

C/A deficit widens 59pc to $7.413bln in first half

KARACHI: Pakistan’s current account deficit rose 59 percent in the first half of FY18 due to high imports relative to exports, State Bank of Pakistan data showed on Friday.

The July-December FY18 current account deficit widened to $7.413 billion. That was wider than the $4.660 billion in the corresponding period a year earlier. However, the current account gap narrowed to $1.130 billion in December from $1.441 billion in the previous month.

The trade deficit surged 24.50 percent to $17.963 billion during July-December FY18.

Exports rose 10.8 percent to $11.776 billion in the first six months of FY18, while imports stood at 26 billion, depicting 18.8 percent increase over the same period of last year, according to the central bank figures.

The SBP’s first quarterly report published on the same day stated that mounting burden of imports exacerbated the pressure on the country’s balance of payments.

Payments related to the import of petroleum, machinery, metal, and transport were particularly heavy during July-September FY18.

“Financing the deficit proved to be a challenge. While foreign direct investment posted significant YoY growth, foreign investors in the equity market seemed particularly sensitive to brewing uncertainty over the political climate as well as the exchange rate outlook,” the central bank said.

“More importantly, the bulk of loan inflows were utilised to honour debt repayments due in the quarter. Consequently, funding the current account deficit led to a decline in the country’s foreign exchange reserves,” it added.

The central bank’s foreign exchange reserves fell $284 million to $13.699 billion during the week ended January 12.

The State Bank predicted that the current account deficit would be 4.0 to 5.0 percent of gross domestic product during FY18.

USA, Canada, Australia, UK, France, India, Brazil, South Africa etc. all have the same situation. What is so special here?

Current account balance forecast Total, % of GDP, 2019 or latest available

 

[SunilM]

Pakistan's foreign reserves slide continues
The Newspaper's Staff Reporter
Updated January 19, 2018

KARACHI: The State Bank of Pakistan (SBP) reported on Thursday its foreign exchange reserves amounted to $13.69 billion on Jan 12, down $2.45bn from $16.14bn at the end of June 2017.

https://www.dawn.com/news/1383863

With limited and ever sliding forex reserves and an ever increasing current account deficit there is bound to be a balance of payment issue. Which leads to Pakistan approaching the IMF again. Hence ' the issue'.

 

[N.Siddiqui]

Which leads to Pakistan approaching the IMF again. Hence ' the issue'.

If Pakistan approaches the IMF, supposedly...how is this an issue, specially for you and the sundry. What is your point, what you mean to say and prove.

Stop repeating the same thing over and over again, check your content so far, almost all the OP's have the same message...why don't you check a good psychiatrist before Pakistan checks in with IMF...

Some strange psychosomatic disorder you are suffering, you are mentally challenged and I feel sorry for you...

@BHarwana @Areesh @Samlee

 

[BHarwana]

Moody's: Further depreciation in the Pakistani rupee would pose short-term challenges but affords long-term benefits

Global Credit Research - 09 Jan 2018


Singapore, January 09, 2018 -- Moody's Investors Service says that the Pakistani rupee (PKR) will likely face ongoing depreciation pressures against the US dollar after a 5% downward adjustment last month. If the PKR depreciates markedly further, the country's central bank will face the difficult challenge of anchoring inflation expectations at moderate levels. The government's debt affordability would also likely weaken further.



However, over the longer term, allowing the PKR to reflect currency fundamentals would reduce the drain on Pakistan's (B3 stable) foreign exchange reserves and enhance the sovereign's capacity to absorb shocks to trade and/or capital flows. Moreover, if inflation expectations are anchored and the government's liquidity risks do not rise sharply, currency flexibility would also enhance Pakistan's price competitiveness, given the current overvaluation of the PKR.



Greater exchange rate flexibility would also improve the economy's shock absorption capacity by incentivizing the reallocation of resources between the tradable and non-tradable sectors of the economy.



Moody's analysis is contained in its recently-released report on Pakistan titled "Government of Pakistan - Further currency depreciation would raise financing costs and inflation short term, enhance competitiveness longer term".



Moody's explains that the PKR depreciated around 5% against the USD, with most of the weakening occurring over three trading days between 8 and 12 December 2017. The depreciation came on the back of a long period of broadly unchanged exchange rate, except for a one-day spike in July 2017. Since 12 December 2017, the PKR has remained broadly unchanged at these weaker levels.



Moody's points out that around one-third of Pakistan's government debt is denominated in foreign currency, and further PKR depreciation would increase the country's debt burden, which was equivalent to 68% of GDP at the end of fiscal year 2017. This is higher than the median estimate for B-rated sovereigns of 55% of GDP for 2017.



Moody's says that if the depreciation is limited to 5%, the weakening of the PKR would pose no significant credit implications for the sovereign. However, given the likely evolution of the current account, further depreciation pressures are likely.



In particular, Moody's expects Pakistan's current account deficit to remain around current levels, at 3%-4% of GDP, due to the high import intensity of domestically-driven growth.



Christian Fang
Asst Vice President - Analyst
Sovereign Risk Group
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

Marie Diron
Associate Managing Director
Sovereign Risk Group
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

Releasing Office:
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

 

[Samlee]

If Pakistan approaches the IMF, supposedly...how is this an issue, specially for you and the sundry. What is your point, what you mean to say and prove.

Stop repeating the same thing over and over again, check your content so far, almost all the OP's have the same message...why don't you check a good psychiatrist before Pakistan checks in with IMF...

Some strange psychosomatic disorder you are suffering, you are mentally challenged and I feel sorry for you...

@BHarwana @Areesh @Samlee

Leave Him Man The OP Guy Has Severe Complexes Typical Of An Indian Troll

 

[N.Siddiqui]

Leave Him Man The OP Guy Has Severe Complexes Typical Of An Indian Troll

Yes I know!! I have actually started to feel sorry for this guy. He is mentally challenged...

 

[SunilM]

Sky-high imports

Brent hit $70/bbl last week and it must have sent some shivers down the spine somewhere in Islamabad. Pakistan’s trade deficit is all but set to cross exports for the second year running. Imports are coming fast and easy. Imports in 5MFY18 are up by a small matter of 24 percent year-on-year at $21.88 billion, based on the SBP numbers.

The provisional PBS numbers for December are out, and the 1HFY18 imports stood at $28.97 billion, which when discounted for SBP numbers, would come around $26.34 billion. Petroleum imports have constituted around 20-22 percent of Pakistan’s total imports in the last three years. This number is all set to go up, and could be scary, especially when non-petroleum imports are refusing to recede. (Read: Scary rise in imports; published on November 15, 2017).

Here is an attempt at a crude sensitivity analysis of Pakistan’s import bill in general, and energy import bill in particular, in context of changes in international oil prices. Should Brent average $60/bbl for the remaining six months of FY18 (current rate: $70/bbl), Pakistan could be looking at an oil import bill of $12.96 billion.


This is based on using very crude method of average of monthly dollar imports to Brent price, which has hovered around 18.5 in the last 12 months. The demand for two major items in petroleum imports category; crude and finished products is estimated to grow by 17 percent year-on-year to 26.8 million tons. Whatever little elasticity there maybe in the case of rising oil prices, is well covered by a fast rising LNG import bill, which could exceed $2 billion for FY18.

Yes, the furnace oil dependence has reduced, but it will have to be substituted by other fuels. And the advent of more power plants on the road and higher growth, mean imported fuel would still be required to keep the engines running. Every $5 increase in oil price per barrel would lead to another billion dollar added to petroleum imports. The base case of $60/bbl Brent price is built around the EIA’s short-term energy outlook. Mind you, the EIA is known for conservative price outlooks. (Read: Oil market: discipline, demand and disruptions, published on January 15, 2018)

The buck then passes on to non-petroleum imports, which have risen by 22 percent year-on-year in 5MFY18. Granted, that it has come from a low base, and power machinery relating to the CPEC has beefed up the numbers. But the game is far from over, as power related CPEC imports are not even half done, and more are slated for 2018 and 2019. Discounting the non-energy imports by 5 percent, should machinery imports inexplicably decide to slowdown for the remaining half of FY18, the import bill would still stand tall at around $56.8 billion, down 4 percent from our base estimate of $59.1 billion.

And it is not machinery alone, as other vital groups such as food and transport have seen a relentless rise. Will the curbing measures yield the desires result, shall soon be seen, but even if that happens, it won’t be in the last six months of FY18. The growth of machinery and related imports may cool down in FY19, mostly due to the base effect, but in value terms, it may not be much different, due to CPEC.

https://www.brecorder.com/2018/01/16/393231/sky-high-imports/

 

[Areesh]

Yes I know!! I have actually started to feel sorry for this guy. He is mentally challenged...

That is condition of a lot of his compatriots too. It is time admins of this forun take action against him.

Hum nai hindustan kai pagalon ko paalnai ka theka nahi lia hua.

 

[Samlee]

An economist says India lacks the guts to even admit that it faces epic economic problems

https://qz.com/1081126/an-economist...o-admit-that-it-faces-epic-economic-problems/

 

[SunilM]

Oil on the boil is bad news for govt
Nasir JamalJanuary 15, 2018

THE recent sharp rebound in global oil prices on the back of supply cuts by the 14-nation Opec oil cartel and other producers led by Russia does not augur well for Pakistan’s economy, industry, exports and households.

With around two dozen oil exporters agreeing to extend their deal to limit their production through 2018, crude oil prices are set to spike significantly over the next several months.

Last week, global oil prices rallied to more than a three-year high of $70 a barrel. Prices have edged up faster than analysts had expected. Oil has gained almost five per cent since the start of this year, and is forecast to move up further.

“The country’s energy import bill has already risen heftily as global oil prices have spiked by almost a third in the last several months… it’s likely to increase considerably going forward,” observed Zeeshan Afzal, an analyst at the Insight Securities brokerage. “The upward journey of crude prices can be expected to go on for some time, though it is difficult to forecast the peak.”

Pakistan’s energy import bill grew 30pc year-on-year to $5.2 billion during the first five months of the present financial year. The current-account deficit almost doubled to $6.43bn during the period, indicating it would go far higher than the full-year target of $9bn.

Half-yearly trade gap also surged to almost $18bn (or 70pc of the targeted $25.7bn for the whole fiscal year) and net official foreign exchange reserves fell to below $14bn.

Rising prices will have consequences for the embattled PML-N in an election year

Analysts agree that rising oil prices will add to pressure on the country’s forex reserves, widen trade gap as we spend more on the energy import bill, push domestic power prices, increase the already high cost of doing business affecting export competitiveness, expand budget deficit, spike inflation and squeeze household incomes.

“It is not good news for Pakistan… whenever oil goes up our economy tanks,” contended Salman Shah, former finance minister in the Musharraf government. “Higher oil prices will prove to be a major drag on the economy already facing serious headwinds.”

Many attribute whatever macroeconomic stability the country has achieved over the last four years to the lower global oil prices that began falling in 2014, a year after the Pakistan Muslim League-Nawaz government had returned to power. But many like Pervez Tahir, former chief economist at the Planning Commission of Pakistan, lament the government did not use the opportunity afforded by lower oil prices to restructure the economy.

“Instead of taking a hard decision, Nawaz Sharif chose to (partially) pass on the impact of lowering prices to domestic consumers, who had already absorbed the expensive oil in their monthly budgets for political reasons,” he said. “The revenues collected thus could have been used for developing and restructuring the economy, and it would have been in a much better shape now to face the shock of rising crude prices.”

Analysts believe that there is little the government can do to offset the potential impact of higher oil prices on the economy.

Some of them say that there is no option but to learn to live with higher energy prices because the government has locked in higher-than-the-global electricity rates with new power producers for the next 25 years. Rising prices will unleash inflation, push the cost of doing business affecting our export competitiveness, increase pain at the pump, and squeeze the people of their meagre savings. And all this because they will have to increase the domestic energy prices as global oil markets escalate.

Analyst Ali Khizar advised the government to seek help from the Saudi government in the form of deferred oil payments to mitigate the impact of its rising prices on the economy. “Higher oil prices pose a major risk to external-sector stability in the present circumstances when current account is growing on surging imports. If we get this favour from the Saudis — like they have helped us many a time in the past — we can easily cross this bridge without any big shock to the economy.”

As the country heads towards new elections in late summer this year, with the PML-N government facing serious challenges from its opponents, Zeeshan Afzal reminds it of the consequences of absorbing the impact of oil price increase because it would lead to significantly higher subsidy burden on the budget.

“There is little the government can do about the surge in global oil prices. But it can mitigate the possible losses to the economy by passing on its real impact on electricity consumers and motorists instead of subsidising them in an election year,” he said. “You cannot offset the impact of higher crude, but you can reduce the damage to the economy by passing on its impact to consumers.”

Published in Dawn, The Business and Finance Weekly, January 15th,2018

https://www.dawn.com/news/1382893

So lets see, the current account deficit target for the current financial year was 9 billion dollars i.e. 5% of the GDP. In the first 6 months its already 7.4 billion dollars. OIl is at 70$. This means the CAD for this FY will be around 8-9 % of the GDP. PML-N is screwing the economy like nothing else could.

 

[Areesh]

An economist says India lacks the guts to even admit that it faces epic economic problems

https://qz.com/1081126/an-economist...o-admit-that-it-faces-epic-economic-problems/

Lol what a country of losers.

 

[Thanatos]

Pakistan's foreign reserves slide continues
The Newspaper's Staff Reporter
Updated January 19, 2018

KARACHI: The State Bank of Pakistan (SBP) reported on Thursday its foreign exchange reserves amounted to $13.69 billion on Jan 12, down $2.45bn from $16.14bn at the end of June 2017.

https://www.dawn.com/news/1383863

With limited and ever sliding forex reserves and an ever increasing current account deficit there is bound to be a balance of payment issue. Which leads to Pakistan approaching the IMF again. Hence ' the issue'.

Thanks for pointing that out, Pak would have never figured it out.