Editorial

An ominous trade deficit

Pakistan's trade deficit has expanded by 38.8 per cent

Editorial April 13, 2017

pakistan 039 s trade deficit has expanded by 38 8 per cent photo reuters

Pakistan's trade deficit has expanded by 38.8 per cent. PHOTO: REUTERS

According to the government’s own figures issued by the Pakistan Bureau of Statistics on Tuesday 11^th April, the trade deficit has expanded by 38.8 per cent to $23.385 billion, an all-time historical high and that with another three months of the current fiscal year to run. The deficit has been trending upwards since the PML-N came to power in 2013, and given that one of the planks of its electoral platform was that the party was business-friendly, this is a considerable setback. The manufacturing sector has continued to shrink, and although the nature of imports suggests an increase in investment and industry it is not going to slow the decline before the next election in 2018.

It is entirely possible that the trade deficit will reach $30 billion by the end of June, again another high. Casting an eye across the analysis of several financial seers there is agreement that a four-year trend has not been addressed, that it has been obvious almost from the outset of the current incumbency and that any remedies are piecemeal.

One such is the strategic trade policy that came on-stream in 2016, when the government set an export target of $35 billion by 2018. Under the policy the commerce ministry notified five cash support schemes that were to be disbursed through the central bank. To date not a single application has been received over the last nine months. Given that the scheme involves direct funding this speaks volumes about the difficulties associated with accessing it.

It is only possible to increase exports from Pakistan by effective state intervention at the entrepreneurial, institutional and policy levels. Yet policy formulation has lagged behind, and now the knock-on effect of failing to do the Big Thinking that would have at least slowed the slide is there, and writ large. Business friendly? Not on this evidence.

Published in The Express Tribune, April 13^th, 2017.

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COMMENTS (1)

Tyggar | 7 years ago | Reply Over dependence on loans and the resulting debt trap has its indirect effect on exports. It forces you to keep your Rupee exchange rate unnaturally high. This in turn hikes your production costs and hence your exports end up becoming non competitive in the international market, preventing you from earning foreign exchange that can be used for imports. Hence like a drug addict, Pakistan has to keep borrowing for imports as well as to repay previous loans.

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