The biggest reason for this surplus was the current transfers mainly dominated by overseas Pakistani workers` remittances. — File Photo
KARACHI: The Current account was surplus at the end of the third quarter of the current fiscal year, strengthening further the economy on the external front.
The State Bank reported on Monday that the country`s current account was $99 million during July-March 2011, mainly on account of higher workers` remittances, improvement in trade of services and a balanced trade deficit despite high oil prices in the international market.The biggest reason for this surplus was the current transfers mainly dominated by overseas Pakistani workers` remittances.
The record remittances, which were above $8 billion at the end of the third quarter, are being disputed by some former bureaucrats, showing their inability to understand these record remittances.
The remittances played a key role to bring down the current account deficit from minus 9.2 billion in FY-09 to minus 3.9 billion in FY10 and now the country`s external account is surplus with $99 million in nine months.
“Comfortable current accounts position can lead to a strong economic recovery in the financial year 2012 provided the global oil price eases,” said Mohammad Sohail, CEO of Topline Securities.
He said better external position, coupled with government`s fiscal discipline, can help get control over inflationary pressure.
The State Bank reported that the surplus in March was $347 million. During this month, remittances were above one billion dollars.
The report shows that the trade deficit was almost same of the last year despite much higher oil prices.
This was due to higher exports and more accurately higher prices of exportable products.
Some exporters said the country may not benefit the windfall in textile exports that was because of global shortage of cotton production. However, the remittances have taken lead role to dilute the impact of trade deficit and help keep current account at minimum level.
Foreign investment is major source of dollar inflows in most of the emerging economies but the country has failed to even maintain the minimum level of foreign investment, instead it has been shrinking for last four years.
The emerging economies are facing a situation like overflow of foreign investment. While they are planning to get control over soaring foreign investment and taxing it, Pakistan received just about $1 billion, a decline of 28 per cent foreign direct investment (FDI) during 9 months.“Pakistan has great potential for foreign investment, but it depends on political stability and persistent disturbing law and order situation in most parts of the country,” said Mohammad Imran, an expert on investment strategy.
He said once the FDI picks up pace, the country would be able to maintain a surplus of the current account.
