Deficit syndrome

A depreciating rupee and unavoidable oil imports are toiling. The trade deficit has shot up to an all-time high, standing at $48.6 billion. This is quite high from last year’s $31 billion deficit; and if the trend of hike in oil prices and its imports continue, the economic wheel of the country is all set to get jammed. As there isn’t any liquidity in the treasury to overcome this new burden, things cannot be sorted out until and unless exports rise and the remittances grow further – not an easy target given the decorum of deficit that is ballooning with each passing day.

The alarming rise in the trade deficit has happened despite a blanket ban on auxiliary imports spanning more than 800 items. But this austerity measure is seen with reservations by the western economies as well as the donors because that comes to impact their own production and, of course, the developing world has always been a dumping ground in pursuit of an enhanced lifestyle and modernisation. Thus, this 57% increase in imports in the last several months is an indicator as to where the figures are heading, and poses a grave threat to the wheel of the economy.

Oil forms the focus of debate these days, as the world is mulling over alternate sources of energy as well as new supply corridors. Pakistan too is in it, but apparently stuck in a divisive debate by keeping in mind the international impact of a change in heart, as well as the viability of its refining industry to cater to raw material from a different origin. Iran these days is being pointed out as one more accessible avenue to obtain the crude on deferred and subsidised prices.

Pakistan has also to watch out seriously on other imports in the food basket that are pinching inflationary trends. Likewise, the last three months have seen a nosedive in exports and textiles is one of the prime victims. Withdrawal of subsidised slab on electricity consumption and raise in taxes has made the world-acclaimed produce from Pakistan uncompetitive. This aspect has to be addressed to, at least, reach a hard break-even in forex reserves.

Published in The Express Tribune, July 4^th, 2022.

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