In a sign of economic slowdown, the country’s trade deficit contracted marginally in the first two months of the current fiscal year because of a decline in exports and imports.
Exports fell 3.3% or $134 million in the July-August period of this fiscal year as goods worth $3.97 billion were exported compared to the corresponding period of previous year, according to latest figures released by the Pakistan Bureau of Statistics (PBS) here on Thursday.
Imports were down almost 2% or $149 million and the import bill reached $7.4 billion. As a result, the trade deficit remained restricted to $3.4 billion, down 0.44% or $19 million over a year ago.
In a bid to protect the economy, independent economists and those working with global institutions have warned the government about the implications of the European debt crisis for Pakistan. They have been suggesting more focus on exploring regional markets as dependence on US and European economies will make the country vulnerable to a crisis.
The State Bank of Pakistan (SBP) has cautioned the government that in the current fiscal year the trade deficit will not be different from the one recorded in the previous year. In 2011-12, the trade gap widened to 36.6% or $21.3 billion, the highest ever due to contraction in exports and double-digit growth in imports.
A continuous decline in exports and pick-up in imports in coming months will surely have implications for the current account at a time when the country has to pay back $2.9 billion to the IMF before June 2013.
According to the finance ministry’s estimates, the current account deficit is expected to reach $4.8 billion in 2012-13 or 1.9% of gross domestic product.
While experts have been warning about the worsening situation, the government has been unable to announce a new trade policy as almost two and a half months have passed since the start of the new fiscal year in July. In the draft trade policy, which was rejected by the finance ministry, the government has painted a rosy picture, showing $95 billion of exports over a period of three years. However, the commerce ministry has not yet come up with a concrete plan on how to get to the $95 billion mark, according to officials involved in this exercise.
In its trade framework, the finance ministry too seems optimistic about international trade. For the current fiscal year, it has set a $25.8 billion export target, which is 9.7% higher from last year’s exports. Similarly, imports have been projected at $42.9 billion, down 3.8% from last year’s level of $44.6 billion.
In August alone, exports fell 1.8% year-on-year, showing a contraction for the second month in a row. In the month, goods worth $1.92 billion were exported, down $34 million than exports made in August last year, according to the PBS.
Imports fell 3.2% to $3.7 billion, $121 million less than imports made in August last year. The trade deficit stood at $1.8 billion, lower by 4.7% or $87 million over a year ago.
Month-on-month data
The trade gap in August widened 10.6% over July due to drop in exports, which fell 7.1% compared to the previous month. In August, imports showed nominal growth of only 0.63%, according to the PBS.
Published in The Express Tribune, September 14th, 2012.
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Shahbaz,
These short-term movements cannot be called trends or extrapolated. The data are too volatile.
Nevertheless, a CAD of less than 2% of GDP for FY13 seems optimistic.