Trade deficit contracts 8.4% to $3.8 billion

Country’s exports and imports shrink during July-August


Country’s exports and imports shrink during July-August. PHOTO: REUTERS

ISLAMABAD:


Raising fears of a slowdown in the economy, already under some duress, latest figures reveal that the trade deficit has contracted 8.4% with exports and imports shrinking in the July-August period of the ongoing fiscal year.


According to the Pakistan Bureau of Statistics, receipts from exports stood at $3.43 billion in July-August, one-tenth or $393 million less than the receipts in the comparative period of the previous year. Imports also contracted by 9.2% and dropped to $7.2 billion, $797 million lower than the payments made in same period of the previous fiscal year, said the national data-collection agency.

Resultantly, the trade deficit in the first two months of the new fiscal year shrank 8.4% to $3.8 billion. It was $344 million less than the previous fiscal year.

Identifying reasons

Exports have been falling because of a decline in production, an overvalued rupee, loss of competitiveness and overall slowdown in the global economy, said Dr Ashfaque Hasan Khan, dean of the School of Social Sciences & Humanities department at Nust. He said the imports were shrinking because of deflationary trends, which suggest that the domestic economy was also slowing down.

Read: Trade deficit widens as poor show continues in FY16

Dr Khan has been ringing alarm bills about deflationary threats to the economy but the Ministry of Finance has not yet acknowledged the challenge.  Being a developing country, Pakistan is highly dependent on the import of goods and a slowdown in imports is one of few indicators suggesting trends in national output.

DESIGN: NABEEL AHMED

Exporters have been complaining about increasing cost of doing business due to the government’s decision to enhance the rate of electricity, gas tariffs and high burden of indirect taxes. The industry’s cost is also growing by almost 3% annually due to the Federal Board of Revenue’s reluctance to clear pending refunds.

Last month, the PML-N government approved, in principle, a three-year trade policy, fixing the export target at $35 billion for 2018.  However, experts have termed it an unrealistic target, which has been set without critically analysing factors affecting exports.

For the current fiscal year, the government has projected that exports will grow to $25.5 billion or 6.6% up from last fiscal year. However, the IMF estimates show that the exports receipts will marginally increase to $24.5 billion.

August performance

The trade deficit contracted to roughly $2 billion in August, which is 28.7% or $801 million less than the one posted in August last year, according to the PBS.

Read: July 2015: Expanding trade gap a wake-up call for govt

The major reason behind the massive reduction in trade deficit was an 18.5% fall in imports. The exports last month stood at $1.8 billion, which were $67 million or 3.5% less than the exports of August 2014.

The trade deficit in August over July widened 12% due to increase in both imports and exports. The exports grew 14.8% in August over July, while imports increased 13.4%, data from PBS showed.

Published in The Express Tribune, September 11th,  2015.

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COMMENTS (2)

manzoor ahmad | 8 years ago | Reply This is a serious issue. While in Pakistan the headline is about shrinking trade deficit, in any other country it would have been falling overall trade level. When imports decrease, it just means less economic activity. Unfortunately government has been taking various steps to check imports not realizing that more imports mean more economic activity and more exports. It also means that because of high taxes on formal imports, now more imports are taking place through smuggling and other extralegal means. It is high time Ministry of Finance and Interior lets other Ministry do their job. While the Ministry of Finance is discouraging Pakistan's trade through its taxation policy, the Minister of Interior every now and then comes up with a statement to spoil Pakistan's bilateral relations with other countries. For example, it did so with Bangladesh and frequently with the United States which is our largest import partner.
Ravian | 8 years ago | Reply Why is there no mention of falling prices of oil in international market which forms a bulk of Pakistan's imports?
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