Trade deficit slightly over $8b in first half

Trade deficit remains restricted despite surging oil prices and significant increase in machinery import.

ISLAMABAD: The country’s trade deficit remained restricted to slightly over $8 billion during the six months ended December 31, despite surging oil prices in the international market and a significant increase in the import of machinery.

The unexpected growth in exports exceeding 20 per cent kept the double-digit growth in imports under check.

The gap between imports and exports stood at $8.2 billion during the first half (July-December) of fiscal 2011, according to Federal Bureau of Statistics (FBS) officials. The deficit is $1.4 billion, or around 18 per cent, higher than the deficit in the corresponding period of the preceding financial year.

Had there been sluggish growth in exports, the deficit could have surpassed the $9 billion mark, say the officials.

Exports in the period under review touched almost $11 billion – $1.8 billion, or 20.6 per cent, more than last year’s exports in the corresponding period. Meanwhile, imports stood at $19.2 billion, marking a growth of 19.6 per cent, or $3.2 billion, in the first half.

Despite the double-digit growth in imports, Pakistan may not face significant problems on the external front because of a matching growth in exports and continuous increase in remittances. Had there been less power outages, exports would have increased by another $500 million in the first half, assert representatives of the All Pakistan Textile Mills Association (Aptma).

Remittances depict a healthy trend. July through November, remittances stood at $4.5 billion – about $700 million more than the corresponding period of 2009. In November alone, remittances were recorded at $927 million.

In five months, the current account deficit – the gap between external receipts and payments – stood at $504 million or 0.7 per cent of total size of economy, show central bank statistics. With a healthy growth in exports, officials are expecting a current account surplus of almost $100 million.

Interestingly, the government does not have a trade policy in place for the current financial year. Unofficial estimates show that exports may remain above $21 billion and imports around $39 billion by end-June 2011 – a gap of $18 billion.

On a month-on-month basis, a near 30 per cent growth in imports was outpaced by 36 per cent growth in exports. The exports grew in dollar terms due to better return on cotton and rice in the international market.

Officials said in December the trade deficit stood at almost $1.63 billion, which was $298 million or 16 per cent more than the figure for December 2009.

Pakistan exported goods worth $2.2 billion during December, compared with $1.6 billion in December 2009 – an increase of $546 million or 36 per cent. Imports in December were recorded at $3.8 billion, an increase of $844 million or 29 per cent over December 2009 statistics.

Published in The Express Tribune, January 11^th, 2011.