Furnace oil import surge: Trade deficit widens in May

Gap between imports and exports grows 128% from April.

ISLAMABAD:

Pakistan’s trade deficit widened unexpectedly to $2 billion in May because of a surge in imports, but steady exports have ensured that the gap stays manageable, statistics show.

The Federal Bureau of Statistics (FBS) said on Friday the country spent $4.3 billion on import of goods in May, which was 32 per cent or $1.05 billion more than the imports made in April. Though details of the imports have not yet been compiled, government officials have attributed the “unprecedented rise” to a “seasonal phenomenon” on the back of soaring demand for furnace oil.

Exports dropped 2.9 per cent or $69 million to $2.3 billion in May compared to a month earlier. The trade deficit, the gap between imports and exports, stood at $2 billion, which was $1.2 billion or 127.6 per cent more than the gap in April.

Though the May trade statistics will not significantly change the external financial position, the numbers are likely to slightly disturb the revised annual trade deficit and import projection.

From July through May, the trade deficit stood at $14.1 billion, which was around one per cent or $39 million more than the gap in the corresponding period of last year. During the 11 months, exports stood at $22.5 billion, which were 28 per cent or $5 billion more than the exports in the corresponding period last year.

Imports during the period were recorded at $36.6 billion, showing a growth of 16 per cent over imports made last year. In absolute terms, imports increased $5.1 billion during the 11 months of the outgoing fiscal year.

According to the revised trade statistics, the government was expecting the exports to cross $24 billion and imports to remain around $39 billion, a gap of $15 billion by June 30. The surge in imports in May and the expected continuation of the same trend in June suggest that the deficit may reach close to $16 billion with $40 billion worth of imports and $24.5 to $25 billion worth of exports.

Exact impact will be known later

Commerce ministry officials said the exact impact of the abnormal increase in imports on the external financial position would only be known after the data for current account – a summary of total external payments and receipts – and remittances is available. In 10 months, the current account remained in surplus at $748 million and the government is estimating a surplus of up to $200 million by the end of the financial year in June.

Pakistan’s external financial position has been improving “mainly because of the impetus provided by a surge in commodity prices in general and textile-related items in particular,” states the recently released Economic Survey 2010-11. Textile exports, which constitute 55 per cent of total exports, surged 66 per cent with a net gain of $2.7 billion in July to April of the current year.

Contrary to monthly statistics, the yearly figures depict a healthy trend. In May, the country earned $2.3 billion by selling goods overseas, which was 40 per cent or $572 million more than the exports in the corresponding month of last year, reported the FBS.

In the same month, imports stood at $4.3 billion, which were 27.5 per cent or $935 million more than imports made in May last year. The trade deficit widened 21.7 per cent compared to a year earlier.









Published in The Express Tribune, June 11th, 2011.