Trade deficit expands to $5.8b during July-Sept 2020

Increases $115m as imports surge and exports contract

ISLAMABAD:

Pakistan’s trade deficit marginally widened to $5.8 billion in first quarter of current fiscal year due to surge in imports and contraction in exports as the government failed to make any significant improvement in exports despite 39% currency devaluation.

The trade deficit - which shows how much imports exceed exports - expanded in terms of all three indicators - year-on-year, month-on-month and cumulative, according to figures released by the Pakistan Bureau of Statistics (PBS) on Monday.

The trade deficit, which stood at $5.7 billion in the comparative period of last fiscal year, widened to $5.8 billion in the July-September period of 2020-21, according to the national data collecting agency.

In absolute terms, there was an increase of $115 million or over 2% in the trade deficit in the current fiscal year. Overall, imports slightly increased to $11.3 billion in the July-September period. In absolute terms, imports grew $63 million.

Exports, which registered negative growth of nearly 1%, stood at less than $5.5 billion in first three months of the current fiscal year. In absolute terms, exports shrank $52 million, reported the national data collecting agency.

The Ministry of Finance, which until August was upbeat about the economic recovery, said last week that economic turnaround could be slower than expected.

Exports remain one of the areas where the Pakistan Tehreek-e-Insaf (PTI) government has been struggling to make improvement. A marginal improvement in exports in absolute terms often gives an impression of a major boost in terms of percentage due to a very low export base.

Pakistan’s exports have long remained around $2 billion a month and the trend did not change despite 39% currency devaluation. The devaluation caused more damage to the economy than any meaningful benefit.

The PTI government has already missed the annual export target in its first two years. 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. However, exports in the first quarter were equal to only 19.7% of the annual target.

Imports in the fiscal year are projected to contract 4.8% to $42.4 billion. But imports in the first quarter were equal to 26.7% of the annual target.

The trade deficit in September 2020 compared to the same month a year ago ballooned 19.5% from $2 billion to $2.4 billion. In absolute terms, there was an increase of $390 million in the trade deficit on an annual basis.

In September 2020, imports in dollar terms surged to $4.3 billion compared to $3.8 billion in the same month of last year, which reflected an increase of 13.2% or $498 million. Imports increased at double the pace of exports.

Exports also increased but only by 6.1% to $1.87 billion in September, a net increase of just $108 million.

Adviser to Prime Minister on Commerce Abdul Razak Dawood even felt proud about mere $108 million increase in exports and sent a tweet.

On a month-on-month basis, exports grew 18.2% in September over August this year. There was an increase of $289 million in export receipts as compared to the preceding month. But total monthly exports were only $1.9 billion.

Imports posted a growth of 28.3%, far higher than the export growth despite a high base, and stood at $4.3 billion last month. There was a jump of $940 million in imports within a month.

As a result, the trade deficit increased 37.4% or $651 million in September over August, according to the PBS.

Due to higher remittances in July, Pakistan’s current account was in surplus in first two months of the current fiscal year.

Published in The Express Tribune, October 6^th, 2020.

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