Pakistan’s current account deficit up by 60%

During the recent visit of officials from the Pakistan stock exchange, Pakistan’s Finance Minister Asad Umar had said that the economy was not in an alarming situation as depicted by the media. (REUTERS/File)
Updated 22 October 2018

Pakistan’s current account deficit up by 60%

  • Imports recorded at $13.8bn and exports at $5.9bn
  • Stock market elicits mixed responses to finance minister’s comments

KARACHI: Pakistan’s external balance of payments continues to haunt Prime Minister Imran Khan as he struggles to cut down the current account deficit which swelled by 60 percent in September this year, data released by the State Bank of Pakistan on Monday showed.
Pakistan suffered $592 million in losses as part of its current account deficit in August which jumped to $952 million in September, showing an increase of $360 million or 60.8 percent.
However, the deficit in the first quarter – from July to September 2018-19 – of the current fiscal year registered a slight decline to $3.665 billion from $3.761 billion during the same period last year. The lower deficit is primarily due to a 13.1 percent increase in remittances.
The July- September current account deficit is 4.7 percent of the GDP as compared to the 4.6 percent recorded a year ago. 
Pakistan’s Finance Minister Asad Umar, on Saturday said he expected the balance of payment situation to improve between August and September.
“The Finance Minister said two days before that it was improving. It shows that his team and staff at Ministry of Finance is not feeding him the correct position,” Dr. Ikram Ul Haq, an expert on economic and legal matters, told Arab News.
The current account deficit is increasing due to increasing imports and insufficient exports. The country’s balance of trade deficit was recorded at $7.8 billion in the first quarter of the current fiscal year against $7.3 billion last year.
During the first quarter of this year, the country’s imports were recorded at $13.8 billion depicting an increase of 6 percent during the same period last year, mainly due to higher petroleum imports. Exports during the period increased by 3.6 percent to $5.9 billion due to higher textile and food exports.
Analyzing the data, Dr. Haq said: “The enhancement of customs duty and regulatory duty on various imported items alone cannot reduce balance of payment situation. The outflows for debt servicing, duty free machinery and inelastic items like petroleum products etc cannot be stopped. We need inflows as foreign direct investments FDIs to reduce the gap.”
During the recent visit of officials from the Pakistan stock exchange, Umar had said that the economy was not in an alarming situation as depicted by the media.
On Monday, stock market investors expressed mixed reactions to Umar’s assurances that the government had the economic situation of the country under control, with the share markets down by 85 points.
“Stocks closed lower on investor concerns for weak economic outlook amid dismal data for the current account deficit for Jul-Sep 2018 at $3.6 billion. Government concerns over IMF [International Monetary Fund] conditions for bailout package, likely raise in power tariff and likely surge in interest rates and further rupee depreciation and uncertainty over corporate earnings outlook at PSX played a catalyst role in bearish close,” Ahsan Mehanti, Chief Executive of Arif Habib Group, said.
The government has taken measures, including the imposition of import duty on some goods, to discourage imports and focus on exports instead.
Facing imbalances on external payment accounts, the government formally requested the IMF for a bailout program recently. Though no official word is available on the deal or the amount requested by Pakistan, Umar had said earlier that “the government is facing a $12 billion external financing gap.”

Bank jobs go as HSBC and Emirates NBD reduce costs

Updated 15 November 2019

Bank jobs go as HSBC and Emirates NBD reduce costs

  • Others have also reduced headcount amid economic downturn and property market weakness

DUBAI: HSBC Holdings has laid off about 40 bankers in the UAE and Emirates NBD is cutting around 100 jobs, as banks in the Arab world’s second-biggest economy reduce costs.

The cuts come amid weak economic growth, especially in Dubai, which is suffering from a property downturn.

HSBC’s redundancies came after the London-based bank reported a sharp fall in earnings and warned of a costly restructuring, as interim CEO Noel Quinn seeks to tackle its problems head-on.

HSBC has about 3,000 staff in the UAE, part of a nearly 10,000-strong workforce in the Middle East, North Africa and Turkey.

The cuts at Dubai’s largest lender Emirates NBD came in consumer sales and liabilities, one source said, while a second played down the significance of the move.

HSBC and Emirates NBD declined to comment.

“The cuts are part of cost cutting and rationalizing to drive efficiencies in a challenging market,” the second source said.

Other banks have also reduced staff this year. UAE central bank data shows local banks laid off 446 people in the 12 months until the end of September. Foreign banks added staff in the same period.

Staff at local banks account for over 80 percent of the 35,518 banking employees in the country.

The merger between Abu Dhabi Commercial Bank, Union Commercial Bank and Al Hilal Bank saw hundreds of redundancies.

Commercial Bank International (CBI) said it would offer voluntary retirement to employees in September, which sources said saw over 100 departures. Standard Chartered, too, cut over 100 jobs in the UAE in September.

Rating agency Fitch warned in September a weakening property market would put more pressure on the UAE’s banking sector.