Financing Gap grossly exaggerated by international financial institution: Finance Ministry

News Image

MG News | October 11, 2017 at 04:48 PM GMT+05:00

0:00

Ministry of Finance spokesman on Wednesday rejected the report recently released to the media by an international financial institution to point out 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

Related News

Name Price/Vol %Chg/NChg
KSE100 135,939.87
307.74M
-0.41%
-562.67
ALLSHR 84,600.38
877.08M
-0.56%
-479.52
KSE30 41,373.68
101.15M
-0.43%
-178.94
KMI30 191,069.98
82.45M
-1.17%
-2260.79
KMIALLSHR 55,738.07
422.01M
-1.03%
-577.24
BKTi 38,489.75
45.79M
-0.02%
-8.33
OGTi 27,788.15
6.87M
-1.24%
-350.24
Symbol Bid/Ask High/Low
Name Last High/Low Chg/%Chg
BITCOIN FUTURES 116,675.00 120,695.00
116,090.00
-3560.00
-2.96%
BRENT CRUDE 68.89 69.41
68.60
-0.32
-0.46%
RICHARDS BAY COAL MONTHLY 96.50 96.50
96.50
0.50
0.52%
ROTTERDAM COAL MONTHLY 104.50 104.50
104.25
-2.05
-1.92%
USD RBD PALM OLEIN 998.50 998.50
998.50
0.00
0.00%
CRUDE OIL - WTI 66.75 67.13
66.22
-0.23
-0.34%
SUGAR #11 WORLD 16.56 16.61
16.25
0.26
1.60%

Chart of the Day


Latest News
July 15, 2025 at 05:46 PM GMT+05:00

Labubu Mania drives Pop Mart’s profit surge


July 15, 2025 at 05:22 PM GMT+05:00

Big industry output rises 2.29% in May


July 15, 2025 at 04:22 PM GMT+05:00

SYS set for 71% profit surge on global tailwinds



Top 5 things to watch in this week

Pakistan Stock Movers
Name Last Chg/%Chg
Name Last Chg/%Chg