Reining the twin deficits | Pakistan Today

Reining the twin deficits

The intricately embellished couch adorned with invaluable gems has begun to show signs of age. And those who had seated themselves, quite comfortably, on what they thought would be a timeless abode should really consider getting up before its too late. Who wouldn’t want piles and piles of the greenback easily perambulating into their humble homes, except that they conveniently forget that those who enter by choice also leave when it suits them to.
The current account deficit has raised one too many brows during 1QFY12 because after all we were doing well, (at least externally) weren’t we? With the invisible hand of God levitating us above the rocky ground, international prices moved at our behest and our long lost relatives, from God only knows, everywhere around the globe were invigorated with an increasing sense of patriotism and responsibility towards their kin. And not even a single soul thought about the eventuality if all these Godly favours were to unexpectedly and suddenly just stop! The day has come my little friend; for the current account deficit in Sep-11 has clocked in at more than $900 million, considerably higher than the deficit for Jul-Aug’11 combined, $301 million. What is more saddening is that the current account deficit during the first quarter Fy12 was twice the deficit in the corresponding period last year.
The contributing factors were a 32 per cent MoM decline in remittances in September, although the cumulative figure for the first quarter was about 25 per cent during the first quarter from an optimist’s view point. However, if the remittance has not been lower by about $420 million, the current account deficit ($1,209 million) would have been positively favoured by the same amount. It seems that our fellow countrymen have entered into several family feuds with relatives in the US, UK, Saudi Arabia and UAE amongst others as ‘family members’ have remitted $95 million, $77 million, $57 million and $100 million less, respectively, over the last month in September . But again, there’s Eid to look forward to!
The balance of trade, another contributing factor, has also deteriorated by more than a billion dollars to settle at about $4 billion during the preceding quarter in comparison to the same period last year. The star performer has been petroleum imports which were 55 per cent higher YoY during the first quarter to settle at more that $4 billion. Ostensibly, the first quarter has invoked the wrath of the Almighty as despite the entire world being subject to economic duress, Arab crude prices fluctuated between $103-108/bbl during the discussed period as compared to $70-74/bbl in the corresponding period last year. Who can one blame when prices are all it takes to turn the tables in our dear economy and esteemed policy makers lack the will and capacity to engage in mercantile trade and invest in ungodly instruments known as futures.
Moreover, while a favourable current account buttressed several ‘maintains’ in the policy umbrella during 2QFY11, now that the favour has fled, the government is displaying great craftsman ship by collecting revenue that exceeded the target by Rs3 billion! Never mind if the target was revised down by only seven odd billion rupees only days before the collection figures were announced. We must under all circumstances encourage hard work done by government through the FBR, we must!
Also, the government needs to be lauded for cutting down current and defense expenditure (by ten whole percentage points!) as a move towards curtailing the fiscal deficit. Maybe our ministers will get deprived of even newer vehicles while land allotted to our military will be valued lower much to their dismay!
One can only empathise!

The writer is an economic researcher and freelance financial journalist. She can be reached at [email protected]