A widening gap

Pakistan’s trade deficit widened to $15.1 billion in the July-February period of the ongoing fiscal year

Pakistan’s trade deficit — gap between exports and imports — widened to $15.1 billion in the July-February period of the ongoing fiscal year, worsening from $14.49 billion in the comparative period of the previous year, signaling that the country’s deteriorating trade performance has outpaced the benefit it has received in the shape of falling oil prices. Provisional figures indicated that exports during the eight-month period stood at $13.87 billion, a 13.3 per cent fall from the previous year, while the import bill only went down 4.95 per cent. The trade performance in two-thirds of the fiscal year indicates that Pakistan’s exports will hit a new low during 2015-16, contrary to the government’s claims that it intends to increase foreign exchange revenue through a growth-led model.

There is no doubt that there has been an economic slowdown in Pakistan’s favoured markets and has led to them curtailing spending. But Pakistan, too, has been reaping the benefit of falling oil prices that has benefited every net importer of oil. During this time, however, the country’s trade gap has gradually worsened, leading many to believe that the benefit received has been overshadowed by the economy’s structural shortcomings. Pakistan’s exports have been falling for some time and a poor business environment is one of the reasons. High costs of production — due to high rates of taxes and power tariffs — and energy woes are reasons that just scratch the surface of the issue. Overdependence on the textile sector to help rally exports and lack of focus on manufacturing finished goods have made matters worse for a country that is saved by workers’ remittances and lenders’ largesse. The trade policy, which was meant to provide a road map for improving the trade deficit, has been pending for a while. LNG has only recently been imported for the industrial sector and preference is being given to textile mills in Punjab. Will this sector alone be enough to help an ailing trade deficit? There has been no clear strategy to improve exports and it won’t be a surprise if the trade deficit keeps worsening in the years to come.

Published in The Express Tribune, March 15^th, 2016.

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