KARACHI, Feb 22: Pakistan’s current account deficit increased by 47 per cent in the first seven months of the current fiscal year, making external payments more difficult for the country, especially in the wake of record high oil prices, crossing $100 per barrel.

Latest data issued by the State Bank showed on Friday that the current account balance was negative with a deficit of $7.510 billion. This was higher by 47 per cent while comparing with the current account balance of seven months of last year.

The SBP further revealed that the country’s balance of trade in goods sharply increased during July-Jan 2007-08 as imports of goods increased by 71 per cent as compared to exports.

The imports during the seven months reached $18.783 billion as compared to $10.977 billion worth of exports.

The imbalances have already built a pressure on country’s ability to bill its foreign payments, including the oil bills. The impact would be more serious if widening current account deficits are not arrested in the remaining five months of the current fiscal.

According to media reports, the country made an effort to get oil on deferred payment from Saudi Arabia, but the attempt failed.

Estimates issued by various researchers showed that the petroleum bill of the country could touch $10 billion till the end of the fiscal “if oil prices remain around $100 per barrel.”

“The rising energy crisis which will be severe in the coming summer, demands more import of oil as only thermal power is the short-term solution of the energy crisis,” said an analyst working on power generation.

“Construction of dams is still far from the reality while the energy crisis has already turned into a nightmare,” said Abid Saleem, the analyst.

The government has given permission to install thermal power generating units in the country which means more crude oil will be imported, thus making the current account deficit a more serious problem for the government.

Researchers said immediate decisions are required to improve the country’s power producing capacity as it had already started hitting industrial activity.

Industries have already been making appeals, asking the government to ensure regular supply of power and gas, and to generate more electricity.

“The power crisis will certainly enlarge the current account imbalance to a record level and will cast dark shadows over foreign exchange reserves of the country,” said a researcher.

The researcher also pointed out that the recent uncertainty in the country has slowed down economic activity and this could further reduce exports, causing an increase in the trade deficit.

The current account and trade deficits would prove a hard nut to crack for the future government as such deficits would not only compel the government to translate the very high world oil prices on the domestic level, but also to face the music of a sudden surge in inflation.

The country has been enhancing its ability to make payment of foreign bills through inflow of foreign investments, remittances, privatisation proceeds, floatation of Global Depository Receipts (GDRs) and Euro Bonds. The current account imbalance is bound to force the country to either reduce the deficit or borrow more and increase the debt burden.