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Pakistan earning sources drying up
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402
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Visits
402
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Visits
402
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Visits
402
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December 30, 2011
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Pakistan micro-economic indicators that are called to be as sources for foreign exchange earnings are continued to drying up amid less hope for growth or even resilient in near future.
The sharp decline in foreign exchange inflows have looming the deficits of trade and current account with it hard hitting impacts on the value of the currency, witnessing under immense pressure against dollar and few leading currencies.
The Foreign Direct Investment (FDI) has dropped sharply so far in the current fiscal year however remittance and exports of the country have also dwindled in the past month (November) that triggered the situation worst for the country’s economy.
The Foreign Direct Investment (FDI) continued to show negative growth of 59.3 percent in the first five months of the current financial year, with constant outflow of Foreign Portfolio Investment (FPI), State Bank of Pakistan (SBP) statistics said.
The overall FDI investment landed $305.4 million during July-November 2011-12 after $114.5 million outflow of capital was brought back by the foreign investors in the bonds and stock markets, which witnessed bearish trend on political uncertainty.
The portfolio investment recorded 166.4 percent decline in July-November 2011-12 as compared with previous year’s $ 172.5 million figures.
FDI from developing countries have exceeded from developed states in the said period.
According to the statistics, the FDI from developing nations is more than double to reach $219.3 million as compared with developed countries that invested $100.4 million in the first five months of the current financial year.
Whereas FPI were also pulled back by $117.7 million from developed countries whereas FPI witnessed surge of $5.4 million from developing nations in the July-November 2011-12.
The investment from Asian countries was witnessed comparatively high as compared with different regions. The countries landed comparatively handsome investment in the Pakistan including UAE with $11.3 million, Caribbean Island with $43.3 million, Kuwait with $ 23.2 million, China with 20 million and South Korea with $16.9 million. Besides different countries from South East Asian region invested $50.7 million.
On the other hand, the FDI outflow from developed countries was tremendous as countries such as UK and Luxemburg were seen outflow of FDI with $100.3 and $12.6 million. Investment was pulled back from European Union and Western Europe regions as FDI outflow registered $80.6 million and $143 million. The FPI from these regions was also registered outflow of $ 98.4 million and $ 89.2 million.
FDI has been showing a dismal trend for past couple of years but overseas’ remittances were considered a stable support for the inflows of foreign exchange however it did not happened this year and country saw negative growth in the amount twice time in five months.
Analysts said the remittances inflows should be enhanced at growing pace, which is the sole factor to continue foreign exchange earnings in the country.
At present, it witnessed 18 percent growth in five months, reaching $1.048 billion in the current fiscal year but the inflows recorded drop of nearly one percent in November 2011 that showed alarming trend for the economic managers.
The drop in overseas workers’ remittances was seasonal after constant surge in the past months but it is hoped that the stabilization of this source will be maintained in the December.
Pakistan’s exports have seen a decline of 13 percent on weakening demand of its products in exporting countries whereas the imports have registered an increase of 19 percent in November 2011 compared with the same month of previous year.
According to the data released by Trade Development Authority of Pakistan (TDAP), the country’s exports of different products have fallen to $1.552 billion, which was 13 percent lower than the level of $1.776 billion recorded in November 2010.
The decline in exports of different products has been caused on the dwindling value and quantity of country’s good in the international markets particularly cotton and textile products.
The exports of cotton yarn have declined by 11 percent in November against corresponding period, followed by 22 percent drop in cotton cloth, 38 percent in knitwear, 40 percent bed wear and 20 percent in towel in quantity terms.
The sharp decline has shaken the trade balance as imports continued to high, resulting swelling trade deficit. Pakistan’s trade deficit widened to $2.17 billion in November, from $1.71 billion in October, according to the Federal Bureau of Statistics.
The trade deficit for the first five months of the 2011-12 fiscal year was $9.06 billion, compared with $6.6 billion in the same period a year earlier
The trade imbalance may continue as exports are under pressure on the drop of industrial production in the country. The ongoing energy shortage has caused alarming decline in textile exports beside whereas exports of cotton will unlikely to recover its high value for fetching good foreign exchange for country.
These three major sources have badly impact on the position of current account deficit, which crossed to $ 2 billion whereas the foreign exchange reserves have been in volatile situation, hovering around $16.9 billion.
Analysts said that the current situation is getting dangerous for the economy hence the economic managers of the sitting government should take emergency measures for averting any possible setback.
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