Global recession: Trade deficit widens 36% in October as exports fall

Energy shortages, European debt crisis take toll on shipments.

ISLAMABAD:

Pakistan’s exports slipped into negative zone in October for the first time in recent history while imports grew 13 per cent that widened the trade deficit by 36 per cent, putting pressure on the external account.

Latest trade figures, released by the Federal Bureau of Statistics (FBS), come at a time when Pakistan and the International Monetary Fund (IMF) are assessing performance of the national economy in Dubai.

October was the third month in a row when exports stood below $2 billion and the second month when imports remained above $3.6 billion.

Healthy exports and an unprecedented growth in remittances have provided an important cushion to the economy. However, remittances fell almost one-third in September over the previous month.

Exports in October were valued at $1.89 billion, $42 million or 2.2 per cent less than the shipments made in October last year, the FBS said. Imports stood at $3.61 billion, higher by $411 million or 12.9 per cent against imports in the corresponding month last year.

Trade deficit widened to $1.7 billion, which was $453 million or 36.1 per cent more than the deficit in the same month last year.

This year, the government expects exports to grow five per cent and imports to rise 12 per cent. The Annual Plan 2011-12 shows exports may increase to $25.8 billion while imports will be around $38 billion. However, the government has not yet announced the trade policy for the current fiscal year.

“Industry closure in Faisalabad due to energy shortages and the European financial crisis have started hurting exports,” said Tariq Puri, Chief Executive of the Trade Development Authority of Pakistan. However, he said gradually the volume of exports would improve that would offset the impact of price decline in the world market.

A joint assessment of the finance ministry and the State Bank of Pakistan, according to Finance Minister Dr Abdul Hafeez Shaikh, says Pakistan will not face balance of payments crisis in the current financial year.

“Pakistan cannot sustain external account pressure with $17.02 billion in foreign reserves that have started declining and forecasts are also there that the rupee-dollar parity and foreign currency reserves will be under tremendous pressure after $1.2 billion loan repayment to the IMF in February,” said economist Dr Shahid Siddiqui.

He said Pakistan would have to seek a new IMF loan this year to avoid balance of payments difficulties, adding commodity prices, which were at high levels last year, were expected to come down this year.

According to FBS data, in four months (July-October) the trade deficit grew by 31.4 per cent or $1.7 billion and stood at $6.9 billion. Imports were $14.7 billion, higher by $2.5 billion or 20.5 per cent than the corresponding period of last year. Exports during the four-month period totalled $7.9 billion, up $857 million or 12.3 per cent compared to the same period of last year. Analysts believe that over 12 per cent growth in exports was mainly because of an unprecedented jump of 27.7 per cent in July, which came because of late clearance of June consignments.

On month-on-month basis, exports grew 3.3 per cent in October over preceding month. Against earnings of $1.83 billion in September, exports surged to $1.89 billion in October. Imports, however, slipped 0.41 per cent to $3.61 billion compared to $3.62 billion last year. The trade deficit shrank 4.2 per cent in October over September.

Published in The Express Tribune, November 12^th,  2011.