ISLAMABAD: Pakistan’s trade deficit narrowed over 30% to $11.6 billion in the first half of current fiscal year due to import compression amid signs of a weakening growth in exports despite numerous administrative measures and giving billions of rupees in subsidies to the exporters.
Trade figures that the Pakistan Bureau of Statistics (PBS) released on Monday showed that exports posted a negative growth both on a yearly and monthly basis, pulling the cumulative growth in exports in July-December down to just 3.2%. The pace of increase in exports slowed down last month.
Exports again fell to $2 billion a month after briefly remaining slightly above $2 billion - a threshold that Pakistan had not been able to cross on a consistent basis. The Pakistan Tehreek-e-Insaf (PTI) government will now surely miss the annual export target - for the second successive year.
In absolute terms, Pakistan managed to increase exports by only $354 million from July through December despite 33% depreciation of the rupee in the previous year. Exports stood at $11.54 billion in the July-December period of the current fiscal year, reported the PBS.
Imports during the period under review dropped 17.1% to $23.2 billion, according to the PBS. In absolute terms, imports contracted $4.8 billion, which provided some relief for the government that was struggling to enhance exports.
The International Monetary Fund (IMF) has projected that the trade deficit of Pakistan in the current fiscal year would narrow down to $24.3 billion, also slightly lowering its projection due to weakening exports.
The IMF had earlier predicted exports to reach $26.8 billion but in its latest report the estimate has been revised down by nearly a billion dollars to $25.7 billion.
Overall, the trade deficit, which stood at $16.8 billion in the first six months of the previous fiscal year, shrank to $11.6 billion in the same period of current fiscal year. In absolute terms, there was a reduction of $5.2 billion in the trade deficit and 93% improvement came from the import side.
Six-month exports were equal to only 43% of the annual target of $26.8 billion while imports were equal to 45% of the target of $51.7 billion. Successive governments have been providing subsidised loans, gas and electricity to the exporters but they failed to produce desired results, which may spark calls for a review of the existing policies.
Overall, the import compression policies have affected the Federal Board of Revenue’s (FBR) tax collection, which have resulted in a shortfall of Rs284 billion in tax revenues despite taking huge advances and blocking taxpayers’ refunds.
The FBR claimed last week that it sustained losses worth Rs336 billion due to import compression in the first half.
The currency devaluation, as part of the import compression policies and also aimed at increasing exports, stoked inflation and increased the cost of doing business. Lack of diversification of export destinations and products, and a high cost of doing business are among the key factors behind the low exports.
Exports contracted on a yearly and monthly basis. On a yearly basis, exports dropped 4% to $1.99 billion in December 2019 over the same month of last year, a net decrease of $82 million.
In December 2019, imports in dollar terms fell to $3.95 billion compared to $4.4 billion in the same month of last year, a contraction of over 10% or $455 million, reported the PBS.
The trade deficit in December contracted 16% to $1.96 billion over the same month of last year.
On a month-on-month basis, exports, which stood at slightly below $2 billion in December 2019, were $21 million or 1% less than the previous month.
Imports marginally increased to $3.95 billion on a month-on-month basis. The month-on-month trade deficit was up by $31 million or 1.6% to $1.96 billion, according to the PBS.
Published in The Express Tribune, January 7th, 2020.
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