Trade gap widens 19% on weak export growth
Deficit stands at $2.1 billion in January after just 2% rise in exports.
On a month-on-month basis, the trade deficit in January widened at an alarming pace of 61% compared to December. PHOTO: FILE
ISLAMABAD:
Pakistan’s trade deficit widened by almost a fifth to $2.1 billion in January over a year ago, as the country recorded a sluggish export growth of less than 2% while imports grew about 10%, according to the national data agency.
The trade deficit – gap between imports and exports of goods – in January was higher by 19.3% or $336 million against the same month of previous year, showed the trade summary released by the Pakistan Bureau of Statistics (PBS) on Wednesday.
During the month, imports were $4.2 billion, up 10% or $374 million than purchases made in the corresponding month of previous year. Exports grew only 1.9% to $2.1 billion.
January’s import bill was higher than the State Bank of Pakistan’s foreign currency reserves, which stood at $3.18 billion, indicating that the reserves were not sufficient for even one month of imports.
The terms of trade may turn to the advantage of exporters only if they are able to fully capitalise on the trade concessions offered under a 10-year programme for duty-free access to EU markets, say analysts.
The EU’s Generalised Scheme of Preferences (GSP) Plus facility came into effect on the first of January but the delay in introducing tariff reforms by the government may undermine the efforts aimed at increasing exports to the bloc, they fear.
On a month-on-month basis, the trade deficit in January widened at an alarming pace of 61% compared to December. The gap was $2.1 billion in January against $1.3 billion in December, according to the PBS.
In absolute terms, the deficit was $790 million higher than that posted in December. Exports contracted almost 10% while imports rose 16.2%.
Seven-month figure
For seven months (July-January) of the current fiscal year, the deficit stood at $11.1 billion, which was 4.5% or $529 million less than the gap the country recorded in the comparative period of previous year, according to the PBS.
Import payments totalled $25.8 billion, $200 million or half a percentage point higher than the payments made in the same period a year ago.
Exports in the seven months remained at $14.7 billion compared to $14.1 billion in the previous year, showing a growth of 4.7%.
For the current fiscal year, the government has estimated that exports will increase to $26.6 billion and imports will stand at $43.3 billion, a gap of $16.7 billion.
After the first review of the $6.7-billion loan programme, the International Monetary Fund (IMF) had revised its trade projections for Pakistan. It revised downward the forecast for export growth to 8.5% and increased the projection for import growth to 8%.
According to the IMF, annual trade deficit will be $16.5 billion, higher by $1.54 billion compared to its original projection.
Independent economists term contraction in the trade deficit a sign of sluggish economic activity. For a developing country like Pakistan, a reasonable deficit is considered a healthy sign of growth.
In recent remarks, the IMF has said that Pakistan’s economy is showing signs of recovery and its economy can grow 3.1% in this fiscal year.
Published in The Express Tribune, February 13th, 2014.
Pakistan’s trade deficit widened by almost a fifth to $2.1 billion in January over a year ago, as the country recorded a sluggish export growth of less than 2% while imports grew about 10%, according to the national data agency.
The trade deficit – gap between imports and exports of goods – in January was higher by 19.3% or $336 million against the same month of previous year, showed the trade summary released by the Pakistan Bureau of Statistics (PBS) on Wednesday.
During the month, imports were $4.2 billion, up 10% or $374 million than purchases made in the corresponding month of previous year. Exports grew only 1.9% to $2.1 billion.
January’s import bill was higher than the State Bank of Pakistan’s foreign currency reserves, which stood at $3.18 billion, indicating that the reserves were not sufficient for even one month of imports.
The terms of trade may turn to the advantage of exporters only if they are able to fully capitalise on the trade concessions offered under a 10-year programme for duty-free access to EU markets, say analysts.
The EU’s Generalised Scheme of Preferences (GSP) Plus facility came into effect on the first of January but the delay in introducing tariff reforms by the government may undermine the efforts aimed at increasing exports to the bloc, they fear.
On a month-on-month basis, the trade deficit in January widened at an alarming pace of 61% compared to December. The gap was $2.1 billion in January against $1.3 billion in December, according to the PBS.
In absolute terms, the deficit was $790 million higher than that posted in December. Exports contracted almost 10% while imports rose 16.2%.
Seven-month figure
For seven months (July-January) of the current fiscal year, the deficit stood at $11.1 billion, which was 4.5% or $529 million less than the gap the country recorded in the comparative period of previous year, according to the PBS.
Import payments totalled $25.8 billion, $200 million or half a percentage point higher than the payments made in the same period a year ago.
Exports in the seven months remained at $14.7 billion compared to $14.1 billion in the previous year, showing a growth of 4.7%.
For the current fiscal year, the government has estimated that exports will increase to $26.6 billion and imports will stand at $43.3 billion, a gap of $16.7 billion.
After the first review of the $6.7-billion loan programme, the International Monetary Fund (IMF) had revised its trade projections for Pakistan. It revised downward the forecast for export growth to 8.5% and increased the projection for import growth to 8%.
According to the IMF, annual trade deficit will be $16.5 billion, higher by $1.54 billion compared to its original projection.
Independent economists term contraction in the trade deficit a sign of sluggish economic activity. For a developing country like Pakistan, a reasonable deficit is considered a healthy sign of growth.
In recent remarks, the IMF has said that Pakistan’s economy is showing signs of recovery and its economy can grow 3.1% in this fiscal year.
Published in The Express Tribune, February 13th, 2014.