Widening trade gap

As anticipated by experts, Pakistan’s trade deficit widened to $15 billion in the first five months of fiscal year 2018. According to the Pakistan Bureau of Statistics, the value of goods imported exceeded the value of those exported by $15.03 billion in July-November. On a year-on-year basis, Pakistan’s exports grew to $1.97 billion in November over the same month of the last fiscal year. Exports were higher by 12.4% or $217 million over the receipts of November 2017. The imports grew at a pace of 16.5% and the country booked $4.9 billion import bill in November. The import bill was $693 million more than that of November 2016. Consequently, the trade deficit widened 19.44% or $2.9 billion in November over the same month of the previous year. In absolute terms, the deficit was higher by $476 million.

A detailed analysis of external trade accounts shows that exports in July-November period increased by 10.5% to over $9 billion but these were only equal to 39% of the annual export target of $23.1 billion. In absolute terms, export receipts were up by $857 million during the first five months. The value of imports stood at $24.1 billon, which was 21.12% or $4.2 billion higher than the import bill booked during the first five months of last fiscal year. The five-month import bill was nearly half of the annual target. From another perspective, the trade deficit in the first five months was equal to 58.5% of the government’s annual target of $25.7 billion, indicating that this year the current account deficit would remain far higher than official projections of $9 billion. Trade results of the first five months have made this year’s $25.7-billion annual trade deficit target irrelevant, but the finance ministry is still not in the mood to portray the real picture of the external sector to the IMF.

Analysts believe that rising trade deficit is a serious challenge for the government. According to a commerce ministry official, the impact of government measures including increasing regulatory duties and introducing several non-tariff measures will apply to imports from December onwards. It is claimed that the surge in import bill is driven by increase in imports of petroleum, food and capital products. The imports of mobile phones and apparatuses also witnessed tremendous growth during the period under review. The import bill of LNG and other petroleum products will rise further following the depreciation of the rupee.

In these circumstances, there is urgent need to promote exports which can only be increased by a combination of prudent policy intervention and entrepreneurial skills on the part of exporters. In this context, it is important to set up an effective and powerful body to oversee and monitor implementation of policies formulated from time to time. Exporters cite increasing production cost as the major hurdle in the way of export growth. High energy cost is another factor in the ever increasing production cost, thereby leaving the country’s industrial products non-competitive in the global market. There are many other hurdles in the way of export growth which need to be removed. The Export Development Fund needs to be more vigorously used for both product development and aggressive marketing.

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Mian Bilal