Not only is the trade deficit 36.4% higher than it was a year earlier but also the highest in the country’s history. The trade deficit broke the previous record of $20.9 billion posted in 2007-08 that forced the government to knock on International Monetary Fund’s door for a bailout package of $11.3 billion to avoid default on international payments. The trade figures are also likely to bring the rupee under further pressure, said an independent expert.
Against the projected growth of 5%, exports plummeted 4.7% from a year earlier, and stood at $23.6 billion at the close of fiscal year 2011-12, according to Pakistan Bureau of Statistics. Exports were $2.2 billion less than the original target but also $1.16 billion less than exports of fiscal year 2010-11, according to official statistics.
Similarly, the government also could not accurately project the import bill that increased 11.2% from a year earlier and stood at $44.9 billion, the highest ever in the country’s history. The final import bill was roughly $7 billion more than the projections of the Finance Ministry and $4.5 billon more than the last year’s imports.
Thus, the actual deficit of $21.3 billion was $9.1 billion higher than the projection.
Missing trade targets by a wide margin will widen the current account deficit – the gap between external receipts and payments – to a much higher degree. At the start of the fiscal year, the government had projected a current account deficit of only $1.4 billion, it stands at $3.9 billion for the first eleven months of fiscal 2012.
With the chain reaction continuing, higher than projected current account deficit will lead to drawdown on foreign currency reserves, currently standing slightly over $15 billion.
The trade figures also beat the International Monetary Fund (IMF) expectations. In its latest report on Pakistan, the IMF had assessed that exports may dip 1.8 per cent while imports could grow 9.2 per cent. The trend may also surprise independent experts who predicted $19 billion trade deficit.
Although finance ministry officials were not available for comments, the justifications given in the Annual Plan 2012-13 documents suggest that the global economic crisis and surge in crude oil prices were the main reasons behind the off-the-mark projections.
The higher export basis of last year, energy shortage, crisis in European markets and India jumping into the rice export market led to missing of export target for the last fiscal year, according to the Annual Plan. It further stated that the high price of crude oil also pushed the oil import bill by an additional $2 billion.
Published in The Express Tribune, July 11th, 2012.
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