ISLAMABAD: Pakistan’s trade deficit swelled to about $14 billion in the first nine months of the current fiscal year, which was $1.5 billion higher than the International Monetary Fund’s (IMF) projection and may largely neutralise the positive impact of $2 billion Eurobonds on foreign currency reserves.
Figures released by the Pakistan Bureau of Statistics (PBS) on Thursday showed that the trade deficit – difference between the value of exports and imports – touched $13.93 billion in July to March of fiscal year 2013-14.
However, it was $809 million or 5.5% less than the gap recorded in the corresponding period of previous fiscal year.
The amount required to finance the deficit could take a toll on the country’s foreign currency reserves as the IMF assessed this year’s financing requirement for Pakistan on the basis of a smaller deficit.
The lender estimated a trade deficit of $12.4 billion for the first nine months and for the full year it put the shortfall at $16.3 billion.
Setting this as a base, the IMF assessed that Pakistan would require $7.7 billion in external funds and the country also needed to raise foreign exchange reserves to $9.4 billion.
Pakistan’s imports during the nine-month period were nowhere near the IMF’s projection, though exports were close to the forecast.
In an effort to strengthen its foreign currency reserves, the government on Wednesday raised $2 billion from the international debt market at very high prices. The interest rates that it agreed to pay were 5.6% above the US treasury rates.
Analysts fear that the positive impact of $2 billion on the foreign currency reserves could be largely eroded because of higher than estimated trade deficit.
The widening trade gap would have a direct bearing on the current account deficit, which would be bridged with the help of foreign currency reserves held by the State Bank of Pakistan, they added.
For July-March 2013-14, import payments amounted to $33.1 billion, which were $282 million or 0.86% higher than the same period of previous year, according to the PBS. However, imports were $1.5 billion higher than the IMF’s estimate.
Exports in the nine-month period stood at $19.1 billion compared to $18.1 billion in the previous year, recording a growth of 6.1% or $1 billion. The IMF too assessed exports at $19.12 billion.
This year, the government is striving to step up exports to $26.6 billion and keep imports at $43.3 billion, a gap of $16.7 billion.
On a month-on-month basis, exports grew to $2.26 billion in March, $96 million or 4.5% higher than February’s shipments.
Trade deficit in March over February contracted 4.6% to $1.36 billion due to almost negligible growth in imports that stood at $3.63 billion.
On a yearly basis, the trade gap was lower by 12% at $1.36 billion against March last year, said the PBS.
In March, imports stood at $3.6 billion, which were 1.6% or $57 million less than imports made in the corresponding month of previous year.
Published in The Express Tribune, April 11th, 2014.
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