Pakistan’s trade deficit worsened to $16.9 billion in the first nine months of the current fiscal year, which was $3.7 billion higher than the projection made by the International Monetary Fund (IMF), putting foreign currency reserves under some pressure.
The trade bulletin, released by the Pakistan Bureau of Statistics (PBS) on Tuesday, showed that both exports and imports contracted in July-March 2015-16, but the pace of decline in exports was three times faster than imports.
Pakistan's exports plunge to 4-year low
The trade deficit - gap between exports and imports - widened 5.5% to $16.9 billion, reported the national data collecting agency. It was $882 million higher than the gap in the corresponding period of previous fiscal year and was also more than the remittances the country received during the period.
The IMF had anticipated that the trade gap during nine months would stand at $13.7 billion, but the actual figure was way larger than that.
This may have implications for the country’s foreign currency reserves that are also taking a hit from the slower-than-anticipated growth in remittances. The State Bank of Pakistan on Tuesday released the remittances data for the first nine months, which showed only 4.1% growth.
In March, the inflow of worker remittances amounted to $1.5 billion, 3.14% lower than February 2016 and 8.7% lower than March 2015.
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All international financial institutions are warning about the slow pace of growth in remittances and its implications for the external sector stability.
The trade deficit widened despite a $3.1-billion bonanza that the country got in shape of a sharp fall in the oil import bill due to a plunge in global prices from July to February. Oil imports during the eight months amounted to only $5.1 billion.
From July through March, exports dropped to $15.6 billion, which were $2.3 billion or 12.9% less than the receipts in the same period of previous fiscal year, reported the PBS.
A major reason behind the fall in exports, which were also $973 million less than the IMF projection, was the absence of an enabling environment for businesses.
Last week, IMF Director Masood Ahmad said Pakistan’s exports were hurt by multiple factors including competitiveness concerns and appreciation of the real exchange rate was not the sole factor affecting the growth in export shipments.
In the IMF’s view, Pakistan is losing competitiveness in the wake of a fall in cotton prices, appreciation of the real exchange rate, power outages and an unfavourable business climate.
Imports during July-March shrank 4.2% to $32.5 billion. These were $1.4 billion less than the comparable period of previous year, but roughly $3 billion higher than the IMF forecast.
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On an annualised basis, the trade deficit widened 20.5%, or $315 million, to $1.85 billion in March this year, according to the PBS. The deficit expanded on the back of around 10% fall in exports and 3.8% rise in imports.
Exports stood at $1.74 billion in March, $184 million lower than the receipts in the same month a year earlier. Imports, however, rose $131 million to $3.6 billion.
Published in The Express Tribune, April 13th, 2016.
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