Trade deficit widens to $17.97 billion

Pressure on reserves to continue; exports grow 11.24% during 6-month period

ISLAMABAD: Despite taking several measures to correct the imbalance, Pakistan’s trade deficit widened to almost $18 billion during the first half of the current fiscal year — one-fourth higher than the one in the previous year.

The value of goods imported exceeded the value of those exported by $17.97 billion in the July-December period, reported the Pakistan Bureau of Statistics (PBS) on Wednesday.

Trade results of the first six months ensure that pressure on the country’s foreign exchange reserves is set to continue, and the trade deficit will be far higher than the annual target of $25.7 billion.

However, the growth in exports was higher than the increase in imports on a month-on-month basis.

Exports in July-December increased by 11.24% to over $11 billion but these were only equal to 47.6% of the annual export target of $23.1 billion. In absolute terms, export receipts were up by $1.1 billion during the first six months.

The value of imports stood at $29 billon, which was 19.1% or $4.7 billion higher than the import bill booked during the first six months of the last fiscal year. The six-month import bill is 59.4% of the annual target.

Export receipts were 263% less than the import bill in the first six months. The higher trade deficit is on an already higher base, as Pakistan had closed the last fiscal year at a record $32.4-billion deficit.

The trade deficit in the first six months was equal to 70% of the government’s annual target of $25.7 billion, indicating that this year the current account deficit would remain far higher than official projections of $9 billion.

The federal government has taken a number of measures including levying regulatory duties on hundreds of tariff lines and more importantly, devaluing the rupee by over 5% against the US dollar.

A higher-than-officially projected current account deficit will have a direct bearing on official foreign currency reserves, which are on a sliding path. Excluding its short-term obligations, the central bank’s net reserves are not more than $5 billion, although gross official reserves stand at $14.1 billion.

For the current fiscal year 2017-18, the federal government has a target to increase the exports to $23.1 billion, which requires 13.2% growth over the last year’s total exports of $20.5 billion. The government is aiming to curtail the import bill to  $48.8 billion, which seems impossible.

Annualised data

On a year-on-year basis, Pakistan’s exports grew to $1.98 billion in December over the same month of the previous fiscal year, according to the PBS. Exports were higher by 14.81% or $255 million over the receipts of December 2016. Imports grew at a pace of 10.1% and the country booked $4.91 billion import bill in December. The import bill was $450 million more than that of December 2016.

Consequently, the trade deficit widened 7.12% or $2.93 billion in December over the same month of the previous year. In absolute terms, the deficit was higher by $195 million.

Monthly results

On a month-on-month basis, exports in December increased only 0.15% to $1.97 billion over November. Exports were $3 million higher than the receipts in the preceding month. Imports in December marginally increased over November, standing at $4.91 billion. The month-on-month trade deficit was slightly up by only 0.3% or $9 million. 

Published in The Express Tribune, January 11^th, 2018.

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