The value of goods imported into Pakistan exceeded the value of exports by $3.2 billion in July over the same month a year ago, reported the Pakistan Bureau of Statistics (PBS) on Thursday.
The trade deficit in July was $1.14 billion or 55.5% higher than the same month of previous year.
The trend was not different from the last fiscal year when Pakistan registered a record trade deficit of $32.5 billion. The current account deficit had also peaked at $12.1 billion in the year, which wiped $2 billion off the official foreign currency reserves.
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Exports in July increased 10.6% to $1.63 billion. In absolute terms, they were only $156 million higher than the same month of previous year. Imports were valued at $4.8 billon, which was 36.7% or $1.3 billion higher than imports made in July last year.
In the new fiscal year 2017-18, the federal government has targeted to increase the exports to $23.1 billion, which requires 13.2% growth over previous year’s exports of $20.5 billion.
The government is aiming to curtail the import bill to $48.8 billion, which seems impossible, given the trend in the first month of FY18.
This will have direct implications for the current account deficit that the government plans to restrict to $8.9 billion in FY18. Independent economists have estimated the current account deficit in the range of $13 billion to $14 billion.
A higher-than-projected current account deficit will have direct bearing on the country’s foreign currency reserves, which are again on the decline. The State Bank’s foreign currency reserves plunged to $14.398 billion by August 4, 2017, down $1.8 billion since June 30.
Pakistan will require about $20 billion in the current fiscal year to meet its external financing requirements including debt repayments.
However, fresh trade statistics have deepened concerns about long-term sustainability of the external sector, which the government is managing by borrowing from foreign countries and commercial banks.
Cheap imports have started hurting the import-substitution industries, according to former finance minister Dr Hafiz Pasha. However, the Ministry of Finance believes that the growing trade and external deficit is a temporary phenomenon due to higher imports under the China-Pakistan Economic Corridor (CPEC).
Exports have been on the decline since the PML-N government came to power four years ago. It has offered two incentive packages to the exporters, but the packages have remained partially funded.
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Former commerce minister Khurram Dastgir’s portfolio has been changed in the new cabinet. The government has appointed Pervez Malik - a businessman from Lahore - as the new federal commerce minister and Akram Ansari as the minister of state for commerce. Ansari had been elected member of the National Assembly from Faisalabad - the hub of textile exports.
On a month-on-month basis, exports in July increased 14.7% to $1.63 billion over June. These were $281 million higher than the receipts in the preceding month. Imports in July grew 6.64% over June. The month-on-month trade deficit was 22.2% higher in July.
Pakistani exporters also could not expand their export base that comprises a very limited number of products.
Published in The Express Tribune, August 11th, 2017.
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