ISLAMABAD:
The trade deficit widened by 50 per cent in September, as exports stood below $2 billion while import bill shot up to $3.6 billion, indicating that the country may face fiscal problems on the external front earlier than official estimates.
Trade deficit – the gap between imports and exports – widened to $1.8 billion compared with last month’s $598 million, according to data released by the Federal Bureau of Statistics on Monday.
It was the second consecutive month that the gap between exports and imports widened. Data also shows that a healthy upward trend in exports has started slowing down.
Exports in September rose 15.3% to $1.83 billion compared to the same month last year, but were below $2 billion for the second consecutive month. Exports had remained above $2 billion since February, restricting the deficit and providing a cushion after suspension of the International Monetary Fund’s (IMF) loan programme.
Imports stood at $3.62 billion in September, which were $841 million or 30.3 per cent higher than imports in the same period last year. Growth in imports was double the growth in exports that may ultimately put pressure on foreign exchange reserves.
A joint assessment of the finance ministry and the State Bank of Pakistan, as claimed by Finance Minister Dr Abdul Hafeez Shaikh, says that Pakistan will not face a balance of payments crisis in the current financial year, an estimate that has encouraged the country to delay another IMF loan programme. However, data shows that the balance of payments situation may worsen earlier than expected.
“To arrest the rising trade deficit, the government will have to find a substitute to the largest import item, furnace oil, and expand the narrow export base,” said Sustainable Development Policy Institute trade expert Dr Abil Sulehri.
The government has not yet announced the trade policy for the current fiscal year. However, the Annual Plan 2011-12 puts exports at an estimated $25.8 billion while imports are likely to reach a staggering $38 billion.
During the first quarter (July-September) of the current fiscal year, trade deficit widened 28.8 per cent to $5.2 billion. Imports grew by 23.2 per cent and stood at $11.2 billion, which were $2.1 billion more than the corresponding period of the last fiscal year.
Earnings from exports remained slightly over $6 billion, depicting a growth of 18.7 per cent.
On a monthly basis, exports dipped 6.5 per cent in September over August. Statistics show that against $1.96 billion of earnings in August, exports in September dipped to $1.83 billion. Imports fell 4.8 per cent in September. Consequently, the trade deficit narrowed three per cent in September over August.
Published in The Express Tribune, October 11th, 2011.
COMMENTS (2)
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Mr Rana,
What is the meaning of the phrase "fiscal problems on the external front"?
Month-on-month movements in exports or imports can be volatile and include special factors. It is best to look at cumulative trends. Even then the picture is not good with exports up 18.7 versus import growth of 23%. The latter is simply too high and cannot be sustained.
Widening fiscal deficit, low export competitiveness, energy crisis, falling forex reserves, fast loosening of monetary policy in the face of high inflation.
These are all the tell tale signs of a balance of payments crisis!