ISLAMABAD: Pakistan’s trade deficit widened to $9.1 billion in the first quarter of the current fiscal year, up 30% as imports grew at double the pace of exports, which dashed hopes of early recovery of the external sector.
The value of goods imported into Pakistan exceeded the value of exported goods by $9.09 billion in the July-September quarter, reported the Pakistan Bureau of Statistics on Wednesday. The trade deficit in the first three months was $2.1 billion or 29.75% higher than the same period of previous year.
Pakistan had already a higher deficit base as it closed the last fiscal year at a record $32.5 billion trade gap. Due to this, the current account deficit had also peaked at $12.1 billion in the last fiscal year.
The State Bank of Pakistan and the finance ministry were optimistic that the country would soon be able to overcome challenges on the external front as exports had bounced back. However, results of the first quarter have hit these expectations as imports are still growing at double the pace of export growth.
Exports in the July-September quarter rose 10.8% to $5.2 billion. In absolute terms, export receipts were $506 million higher than the same period of previous year.
Imports stood at $14.3 billon, which was 22.2% or $2.6 billion higher than the import bill in the first three months of previous year.
For 2017-18, the federal government has set the export target at $23.1 billion, which requires 13.2% growth over last year’s exports of $20.5 billion. It aims to curtail the import bill to $48.8 billion, which seems impossible, given the trend in the first two months.
The World Bank on Monday warned that Pakistan’s external sector vulnerabilities were on the rise. Chief of the Army Staff General Qamar Javed Bajwa also spoke about vulnerabilities of Pakistan’s economy.
At a seminar on ‘Interplay of Economy and Security’ in Karachi on Wednesday, the army chief said growth had picked up but debts were sky high. The current account balance was not in Pakistan’s favour, he said.
The first-quarter results have made the government’s current account deficit target of $8.9 billion for this fiscal year irrelevant. The World Bank and the Asian Development Bank have projected roughly $13.8-$14.5 billion deficit.
The Economic Coordination Committee took some measures last week to boost exports and curtail imports. But experts say these piecemeal actions would not address structural problems of the economy.
A higher-than-projected current account deficit will have a direct bearing on the official foreign currency reserves, which are again on the sliding path, standing at only $13.8 billion.
Independent economists say Pakistan will require about $20 billion in the current fiscal year to meet its external financing needs, although the finance ministry has put the figure at $18 billion including debt repayment obligations.
The PBS data showed that Pakistan’s exports grew 8.9% to $1.68 billion in September over the same month of previous year. The pace was slower than the previous month when exports had increased 13%. In absolute terms, the exports rose only $137 million.
Imports grew 16.73% to $4.47 billion in September. The import bill was $641 million more than that in September 2016.
Consequently, the trade deficit widened 22% to $2.8 billion in September over the same month of previous year. In absolute terms, the deficit was higher by $504 million.
On a month-on-month basis, exports in September dipped 10.2% to $1.68 billion over August. These were $191 million less than the receipts in the preceding month. Imports in September also decreased 9.7% over August, standing at $4.5 billion. The month-on-month trade deficit was down by 9.3% in September.
Published in The Express Tribune, October 12th, 2017.