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$1.23bn surplus in July-Sept balance of payments

KARACHI (November 14 2002) : Pakistan's balance of payments posted a surplus of $1.23 billion in the first quarter ended September 30, 2002, as compared with the deficit of $ 69 million of the same period a year ago, as remittances from expatriates more than tripled and foreign investment improved significantly.

Pakistan's balance of payments surplus for the fiscal year ended June 30, 2002, was to $2.7 billion, from $ 300 million in the previous year.

Pakistan citizens working in countries such as Saudi Arabia, Kuwait and the US sent home $1.053 billion during the period, more than triple of the previous year's amount. Expatriates sent more money through official banking channels after a crackdown on the illegal 'hundi' network of moneychangers.

Many countries have curtailed informal money transfers since September 11, 2001 incident in the US on suspicion that terrorist groups were using such channels to transfer funds.

The rupee has risen more than 9 percent on the inter-bank market since September last year.

Foreign investment in July through September was $170 million, up from $69 million in the same period a year ago.

Pakistan's external accounts took a U-turn in FY02, witnessing an unprecedented surplus of $2.7 billion in overall balance of payments. This new direction is continuing in the current fiscal year also as depicted by the July-September 2002 statistics, said Salima Aziz, research analyst at Invest Capital Securities.

Current account balance for 1Q FY03 posted a surplus of $1,227 million compared to a deficit of $69 million in 1Q FY02. However, the current account surplus for 4Q FY02 was $649 million.

This tremendous improvement of $578 million in the current account in 1Q FY03 when compared with 4Q FY02 is mainly on account of inflows under the sub-head of 'other goods' and services. During 1Q FY03, the trade balance deteriorated slightly when compared with 4Q FY02.

However, lower interest payments on account of debt re-profiling helped in 1Q FY03. This time around, an improvement of $293 million in workers' remittances under the head of 'private transfers' was matched with no dollar purchases from the kerb by SBP. During the preceding quarter, SBP's outright purchases were $ 309million.

The services account in 1Q FY03 posted a deficit of only $150 million compared to a deficit of $830 million in the corresponding period last year and a deficit of $810 million in 4Q FY02.

This huge improvement in services account has mainly been impacted by 'other goods, services & income' segment contributing $514 million to the exchequer in 1Q FY03. Thanks to Pakistan joining hands with international community in the drive against terrorism, more than $300 million (estimated) in 1Q FY03 came in the form of logistic support.

With $2.7 billion current account surplus in FY02 and $1.2 billion in first quarter of running fiscal, these huge inflows are likely to settle down in the coming quarters. One-time inflows (like $600 million US grant and logistic support) might not be able to hold fast and fetch surprises going forward. That is why IMF in its latest report predicts that 'current account is expected to move from a surplus to balance in line with historic trends'.

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