Trade deficit shrinks 10% in July-February 2012-13. CREATIVE COMMONS
The trade deficit contracted 10% to $13.26 billion in the first eight months of the current fiscal year on the back of healthy growth in exports and a continuous decline in imports.
Compared to the country’s exports worth $15.9 billion in July-February 2012-13, the import bill stood at $29.1 billion, according to figures released by the Pakistan Bureau of Statistics here on Tuesday.
This resulted in trade deficit – imports exceeding exports – of $13.2 billion, but it was 10.1% lower than the trade gap of $14.7 billion in the corresponding period of the previous fiscal year.
In July-February of the current fiscal year, exports grew 5% or $756 million than the previous year. On the other hand, imports dropped 2.4% or $719 million compared to a year earlier.
As a developing nation, a reasonable growth in trade deficit is considered a reflection of a growing economy. But despite deterioration in international trade, shrinking foreign loans and plunging investments, there seems to be no urgency in relevant quarters to take required policy actions.
Over the last five years, foreign investment has decreased dramatically. In 2008, foreign investment stood at $5.5 billion, which has plunged to just $684 million in the first half of the current fiscal year.
Similarly, inflows of loans are much lower than the amount being paid to retire principal loans and make interest payments.
In February alone, the trade figures depicted a somewhat depressing trend as both exports and imports contracted and trade deficit widened 6.6% over the same month of previous year.
In the month, exports dropped 8.7% year-on-year as goods worth $1.84 billion were shipped, $175 million less than exports made in February 2012, according to the PBS. Imports shrank 2.3% in the previous month to $3.4 billion, $79 million lower than the import bill in February last year. As a result, the trade gap increased 6.6% to $1.55 billion over a year ago.
The Asian Development Bank has cautioned Pakistan that the country immediately needs a $9 billion relief package from the International Monetary Fund to avert a balance of payments crisis, which is already setting in.
However, economic managers insist that they have a substantial foreign exchange cushion that can finance three months of imports, an assessment made without taking into account forward contracts where the State Bank of Pakistan has pledged over $2 billion.
On month-on-month basis, exports and imports slowed down at almost the same pace in February over January. Exports dipped 9.3% while imports fell 10%, with the deficit narrowing by 11%.
Published in The Express Tribune, March 13th, 2013.
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@nadir; Chinese imports have not reduced. They have increased, but exports have increased more. Check the figures. Also dont compare pakistan economy to china. China is an entire country run like a factory, unlike other asian democrazies. You should also realise that both wen jiabo and xi jinpeng have stressed on the need to consume more to prevent their economy from crashing. The days when you can run trade surpluses for decades are gone and now every country is devaluing their currency.
@hasan: If declining imports is a sign of a faltering economy we better go and tell Chinese economic managers that there 2 decades of surpluses is a sign of a declining economy.
Declining imports are clear sign of faltering economy, low productivity, low consumption, poor growth, and all negatives in an economy. As long as economy is vibrant and growing, demands will rise, and imports will rise. So clearly this is bad sign.... and in this scenario where 20 hours a day there is load shedding and thousands of factories closed down, either by power, violence, or simply thrown out by chinese, where are these numbers coming from?
How is a reasonable growth in the trade deficit a good sign? AD=C+I+G+(X-M), a growing deficit will eat away at economic growth. What matters is why the imports have fallen? Is it because a fall in import prices of say oil? Or is it because businesses are importing less capital? We dont suffer from deflation that "policy makers" should take "relevant action" to increase our trade deficit!