Imports continue to surge, deficit widens to $12.1b in Jul-Oct

Trade gap reaches close to half of the annual target in just four months

ISLAMABAD: Pakistan’s trade deficit widened to $12.1 billion in first four months of the current fiscal year, which is nearly half of the annual target set by the government and is the result of unstoppable growth in imports that were almost triple the value of exports.

The value of imported goods exceeded the value of exports by $12.13 billion in the July-October period of FY18, reported the Pakistan Bureau of Statistics (PBS) on Monday.

The trade deficit in the first four months was $2.9 billion or 31.24% higher than the same period of previous year. This deficit came on a higher base as Pakistan had closed the last fiscal year at a record $32.4-billion deficit.

The trade gap in the first four months was equal to 48% of the annual target of $25.7 billion, indicating that this year again the current account deficit would remain far higher than official projections.

Exports in July-October increased one-tenth to $7.1 billion but were only equal to 30% of the annual target of $23.1 billion. In absolute terms, export receipts went up $644 million. The value of imports stood at $19.1 billon, which was 22.6% or $3.53 billion higher than the import bill in the first four months of last fiscal year. Imports reached 39% of the annual target.



However, the worrisome aspect was that export receipts were 276% less than the import bill.

Last month, the government introduced heavy regulatory duties on scores of goods in order to curb imports. Lately, it was revealed that the duties were primarily aimed at enhancing revenues rather than cutting the import bill. Total impact of these regulatory duties is estimated at below $400 million, which is insignificant when compared with $53 billion worth of imports in the last fiscal year.

For the new fiscal year 2017-18, the 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 restrict imports to $48.8 billion, which seems impossible, given the trend recorded in the first four months.

The first four-month results have made the $8.9-billion current account deficit target irrelevant. The World Bank and the Asian Development Bank have projected roughly $14 billion to $14.5 billion in current account deficit.

A higher-than-projected current account deficit will have a direct bearing on the central bank’s foreign currency reserves, which are again on a sliding path, standing at only $13.8 billion.

Independent economists say Pakistan will require about $20 billion to $25 billion in the current fiscal year to meet its external financing needs, although the finance ministry puts the figure at $18 billion including debt repayments.

October data

The growth in exports on an annualised basis slowed down for the third consecutive month, standing at 7.9% in October over the same month of last year. PBS data showed that exports grew to $1.9 billion in October.

In absolute terms, export receipts increased only $138 million. Imports grew at a pace of 23.6% and the country paid $4.93 billion worth of import bill in October. Imports were $941 million more than October 2016. Consequently, the trade deficit widened 35.9% or $3.1 billion in October over the same month of previous year. In absolute terms, the deficit widened $802 million.

Published in The Express Tribune, November 14^th, 2017.

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