Pakistan’s trade deficit contracted to $3.4 billion in first two months of the current fiscal year due to shrinking imports. However, exports also went down over 4% during the period, prompting the government to find explanation for the failure.
The drop in exports during the July-August period was surprising for the government, which had declared just weeks ago that the economy was recovering from the adverse impact of the deadly respiratory disease - Covid-19.
Exports fell in terms of all three indicators - annual, monthly and cumulative - for the month of August.
The trade deficit, which stood at $3.7 billion in the comparative period of last fiscal year, shrank to $3.4 billion during July-August of 2020-21, the Pakistan Bureau of Statistics (PBS) reported on Friday.
In absolute terms, there was a reduction of $307 million or around 8% in the trade deficit in the current fiscal year.
Overall, imports dropped 6.3% to nearly $7 billion during the July-August period. In absolute terms, the imports contracted $467 million, which provided some relief to the government that had been struggling to enhance exports after coming to power.
Exports, which registered a negative growth of 4.2%, stood at only $3.6 billion during the first two months of the current fiscal year. In absolute terms, the exports shrank $160 million, reported the national data collecting agency.
Hardly a week ago, the Ministry of Finance, in its monthly Economic Update, reported, “It is expected that in August receipts on exports of goods would fluctuate around current levels, implying that they would recover/surpass the level seen in August 2019.”
On Thursday - a day before the PBS reported the official trade statistics - Adviser to Prime Minister on Commerce Abdul Razak Dawood said rains and subsequent urban flooding, particularly in Karachi, caused a significant damage to the infrastructure, disrupted the supply chain and affected exports in August.
Dawood voiced hope that exports would begin to recover in September as economic activity was expected to return to normal, particularly in Karachi.
The flooding in Karachi did affect export consignments but their receipts were not going to materialise immediately.
Power outages, slowdown in business activities, delay in transportation and hampering of port operations were some of the issues faced by the exporters due to the unprecedented monsoon rains in the country, according to the Ministry of Commerce.
The Pakistan Tehreek-e-Insaf (PTI) government has already missed its annual export target for the first two years. For its second year, the PTI government had set the export target at $26.2 billion, which it later revised downward to $22.4 billion.
For the current fiscal year, the government has set the export target at $27.7 billion, which will require only 6.2% growth, and it should not be an uphill task. Imports in the new fiscal year are projected to contract 4.8% to $42.4 billion.
Trade deficit is also targeted to go down to $19.7 billion in fiscal year 2020-21, a contraction of 15%.
The trade gap in August 2020 as compared to the same month a year ago improved 8.9% from $1.86 billion to $1.7 billion. In absolute terms, there was a reduction of $166 million in the trade deficit on an annual basis.
In August 2020, imports in dollar terms fell to $3.3 billion compared to $3.7 billion in the same month of last year, which reflected a contraction of nearly 12% or $441 million.
Exports decreased 14.8% to $1.6 billion in August, a net reduction of $275 million.
On a month-on-month basis, exports shrank 20.9% in August over July this year. There was a decrease of $418 million in export receipts as compared to the preceding month.
Imports posted negative growth of 11% or $408 million to $3.3 billion last month. As a result, the trade deficit marginally increased 0.6% in August over July, according to the PBS.
Published in The Express Tribune, September 5th, 2020.
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