Pressure on external accounts continued as Pakistan’s trade deficit widened by almost 50% to $8.8 billion in the first four months of the ongoing fiscal year on back of a dip in exports and double-digit growth in imports.
The trade deficit – gap between imports and exports – from July through October this year stood at $8.8 billion, which is $2.9 billion or 49.4% higher than the deficit in the comparative period previous year, showed data released by the Pakistan Bureau of Statistics.
Pakistan’s exports contracted by 6.9% during the July-October period and stood at only $7.97 billion, which is $587 million lower than the exports made in the comparative period of the previous fiscal year, said the PBS.
The reduction was witnessed despite Pakistan availing duty-free access to the European markets. Analysts said factories have not been running at optimal capacity level due to the power crisis.
Contrary to contraction in exports, Pakistan’s import bill increased to $16.8 billion during the first four months, showing an increase of $2.4 billion or 16.1% over the comparative period. The import bill is swelling every month despite up to a $20-per-barrel reduction in oil prices in the international market.
The worrisome trend suggests that the current account deficit – the gap between external receipts and payments – would be far higher than the budgeted number of $2.8 billion or 1.1% of Gross Domestic Product, according to an economist working with a government agency. Independent analysts say that the government has started facing difficulties in getting foreign loans; the result of the widening trade deficit would be the erosion of foreign currency reserves held by the State Bank of Pakistan.
As of November 10, the country’s total foreign currency reserves stood at $13.27 billion including $8.5 billion held by State Bank of Pakistan, said Finance Minister Ishaq Dar. He said the government was analysing the reasons for the significant reduction in exports. Dar said curtailment of gas supplies and the electricity to the industrial sector were factors as well.
The national planners have projected a 5.8% growth in exports and 6.2% growth in imports for the current fiscal year. The imports for the current fiscal year have been projected at $44.2 billion as against $26.99 billion exports, showing the trade deficit of $17.2 billion.
Yearly statistics
In October, the trade deficit contracted almost 3% over the same month last year due to contraction in both imports and exports. As against a trade deficit of $2.4 billion in October last year, the deficit came down to $2.3 billion last month, according to the PBS.
As against $2.2 billion exports of October last year, the receipts from exports were below $2 billion last month, showing contraction of 10.3%. The imports last month contracted to $4.3 billion as against imports of $4.6 billion of October last year.
Monthly statistics
However, on a monthly basis, the trade deficit in October widened 63% over September due to marginal growth of 5% in exports as compared to an exceptional growth of over 30% in imports, data from PBS showed.
Published in The Express Tribune, November 13th, 2014.
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