Trade gap: With four months still to go, deficit crosses annual targets

Exports plummet while imports grow in double digits.

ISLAMABAD:

The trade deficit widened to $14.6 billion or 41.3% in the first eight months of the current fiscal year, higher than the Finance Ministry, Planning Commission and State Bank of Pakistan estimates for the entire fiscal year.

Independent experts have assessed that the deficit may even cross the $19 billion mark against initial estimates of $13.5 to $14 billion.

The trade figures released by Pakistan Bureau of Statistics on Monday shows that the exports plummeted after showing a modest growth earlier in the year while imports kept growing in double-digits.

The growth in import bills remained constant and surged 16.4% to $29.8 billion during July 2011 to February 2012, an increase of $4.2 billion over imports in the corresponding period in the previous year. However, exports during this period remained at $15.2 billion, $65 million or 0.5% less than last year.

For the current fiscal year the government has targeted to earn $25.8 billion from exports receipts but the trend indicates that the authorities are going to miss the target. It has estimated a 13% growth in imports while increase in exports has been assessed at 3% over the last year.

Contrary to that, the International Monetary Fund (IMF) in its latest report on Pakistan has estimated that exports may dip 1.8% while imports can grow 9.2%.

Missing the trade deficit target is likely to have an adverse impact on the current account deficit and eventually lead to drawdown of foreign currency reserves, currently standing at $16.3 billion. The IMF has assessed that Pakistan’s foreign currency reserves may deplete to $12.1 billion due to deteriorating external account, not even enough for three months import bill.

February data

In February, exports plummeted 5% while imports rose over 13%, causing a 56.6% increase in trade deficit over the corresponding month of the previous year, data shows.

Exports crossed $2 billion mark for the first time in six months and stood at $2.1billion, but yet $107 million less than exports made in the same period last year. February was the fifth consecutive month exports slipped into the negative zone.

Imports grew to $3.5 billion, $409 million higher than the previous year. The trade deficit widened to $1.5 billion in February, $516 million higher than the deficit in February 2011.

However, the monthly figures yet for another month depicted an interesting trend. When compared with January 2012, exports in February rose to $2.1 billion, up $81 million or 4.2%. Imports, however, slipped to $3.5 billion, down 5.2% or $187 million from January.

As a result, the trade deficit contracted around 16% and stood at $1.5 billion. In January, the gap was $1.7 billion.

Published in The Express Tribune, March 13^th, 2012.