Deficit widens to $1.45b in July

ISLAMABAD: Pakistan’s trade deficit widened by 24 per cent in July as import growth surpassed the growth in exports, and the State Bank may be compelled to take measures aimed at curtailing import demand if the trend continues.

The gap between exports and imports widened to $1.45 billion in July, according to the Federal Bureau of Statistics on Thursday. The trade deficit was recorded at $1.17 billion last July.

The last six months’ statistics took the experts by surprise as exports grew at an average of 14.5 per cent and the average growth of imports remained at 18.5 per cent during the same period. They say that if the trend persists in coming months it would widen the current account deficit, the gap between total international receipts and payments.

“The growth in exports is healthy but the import pressure will grow more and the State Bank of Pakistan may have to take certain measures like allowing the rupee to depreciate further to curtail external demand,” said Zafar Hasan Almas, an economist working with the government.

Imports in July surged to $3.23 billion, an increase of $599 million over the imports of July 2009, showing a growth of 22.7 per cent. Exports to the rest of the world stood at $1.78 billion, which were $320 million or 21.8 per cent more than the exports in July 2009.

The imports for the commodities sector were on the rise as compared to the machinery sector.

The government has remained unable to announce the trade policy for the current financial year 2010-11, which started on July 1. Reports suggest that the government is likely to fix the export target at $21.3 billion, a projected growth of 10 per cent over the exports of last year. In 2009-10, exports amounted to $19.3 billion.

This year imports are likely to remain around $39 billion. Last year, imports were registered at $34.7 billion.

President Asif Ali Zardari during his recent visit to Britain claimed that last year Pakistan’s exports were worth $35 billion against imports of $36 billion. According to the FBS, in July exports declined to $1.78 billion as against exports of $1.81 billion in June, a slide of 1.73 per cent in dollar terms. Imports in July slightly increased to $3.23 billion from $3.22 billion in June, a growth of 0.45 per cent.

Published in The Express Tribune, August 13^th, 2010.