Pakistan’s trade deficit widens 27.3%

Exports continue to fall amid concerns of tougher challenges ahead for the country

ISLAMABAD: External trade figures continued to present a dismal state of affairs, deepening apprehensions about the challenges ahead for the country.

Pakistan posted a trade deficit of $4.8 billion in first two months of the fiscal year - higher by $1.1 billion over the same period of the last fiscal year, after a steep decline in exports and double-digit growth in imports, reported the Pakistan Bureau of Statistics (PBS) Friday.



Worker remittances also contracted 3.1% in the July-August period to just $3.1 billion, reported the State Bank of Pakistan on Friday, but figures for August remained higher year-on-year.

However, the dip in the two leading sources of external accounts could be a worrying sign for the country’s economic managers. This will deepen dependence on external borrowings to balance the books.

Receipts from exports slipped to $3.13 billion in July-August period - as much as 8.2% or $280 million less than the receipts in the comparative period of the last fiscal year, according to figures released by the PBS.



In contrast to contraction in exports, imports saw a growth of 10.3% as payments against goods increased to $7.9 billion - $738 million more than the payments made in July-August of last year.

Resultantly, the trade deficit in the first two months of the new fiscal year 2016-17 widened 27.3% to $4.8 billion - $1.1 billion more than the one posted in the comparative period of the previous fiscal year.

The government’s response to the deepening crisis, as usual, was constitution of yet another committee to give a package to the exporters.



Prime Minister Nawaz Sharif on Thursday constituted a committee headed by Finance Minister Ishaq Dar and leading exporters to work out final recommendations to increase exports, according to a hand-out of the Prime Minister’s Office.

The prime minister said that the government would give short-, medium- and long-term relief to exporters so that no segment is left behind in achieving growth targets, added the hand-out. The prime minister directed the Ministry of Commerce to make arrangements for duty free import of five million bales of cotton in the wake of low cotton exports of the country. He further directed that a proposal in this regard be immediately presented to the Cabinet for approval.

The decisions taken by the premier during his last visit to Karachi showed inconsistencies in the government’s policies. In June this year, the government had imposed 4% duties on import of cotton despite its low production.

Hardly a year ago the government gave what the finance minister called a comprehensive package to the textile industry for increasing exports. The last package did not work and the country ended the previous fiscal year at an eight-year low level of exports.



Free Trade Agreements with China and Malaysia, over Rs300 billion stuck refunds, high-energy costs and slowdown in global growth are among the reasons for the constant decline in exports. The private sector has also failed in modernising machinery and bringing efficiencies to compete with the regional countries in the global markets.

The government would do whatever possible to come out of negative exports growth trajectory, said Board of Investment Chairman Miftah Ismail, who is also a member of the newly constituted committee on exports.

The negative growth in exports highlights the difficulties that the country may have to face in balancing external accounts in the longer run. Although in the short-term there is no threat to the external sector, long-term projections are bleak due to decline in both exports and increase in imports due to the China-Pakistan Economic Corridor.



The government closed the last fiscal year 2015-16 at an eight-year low, with exports falling to $20.8 billion despite preferential access to European markets. The exports have been declining since the current government took over, falling from $24.5 billion in 2012-13.

For fiscal year 2016-17, the government has projected the exports to grow to $24.75 billion and has estimated that the imports will surge to $45.2 billion by the end of this fiscal year.

Shortfall in exports and growing imports will cause problems in financing current account deficit. The government has started facing problems in sustaining high pace of growth in remittances -a major source of balancing the foreign payments, due to slowdown in Gulf economies.

Yearly statistics

The yearly trade statistics are also worrisome. The trade deficit in August widened 35.5% over the same month of last year due to expansion in imports and a dip in exports. The exports fell 9.4% in August over the last year, while imports increased 13.9%, data from PBS showed. 

Published in The Express Tribune, September 10^th, 2016.

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