Trade deficit contracts 12% in Jul-Oct

Exports amount to $6.88b in four-month period, deficit now stands at $7.7b

ISLAMABAD: Pakistan’s trade deficit has contracted by over 12% to just $7.7 billion from July through October on back of nose-diving imports and exports, beating projections of the government and all multilateral financial institutions expecting at least nominal growth.

The outlook also remains bleak, as exports are not expected to pick up due to weak global demand and appreciation of real effective exchange rate of the country, besides inconsistency in the government’s policies.



The receipts from exports stood at only $6.88 billion in July-October period, negative 13.4% or $1.1 billion less than the receipts in the comparative period of last year, reported the Pakistan Bureau of Statistics on Wednesday.



Imports also contracted 12.8%, dropping to $14.6 billion in July-October period, which were $2.1 billion less than the import bill of the comparative period previous fiscal year.

Resultantly, the trade deficit in first four months of this fiscal year shrank 12.2% and stood at $7.7 billion. It was $1.1 billion less than the previous fiscal year, showed the PBS.

The IMF has projected a marginal growth of 0.7% in exports in the current fiscal year, unlike the government’s estimates of 6.6% growth.

Annual performance



The trade deficit narrowed down to $2.2 billion in October, which is $92 million or 4% less than the one posted in October last year, according to the PBS. The trade deficit contracted due to 11.4% fall in exports that stood at $1.7 billion. These were $222 less than the export receipts in comparative period.

The imports last month stood at $3.9 billion, which were $314 million or 7.4% less than the exports of October 2014.

However, the trade deficit in October over September widened one-fourth to $2.2 billion. The exports marginally contracted while imports grew over 12%, data from PBS showed.



Future trends

A World Bank report, released on Wednesday, gives some insight to what is happening at the external front. It said that recent slowdown in China and a weak recovery in the European Union may have direct and indirect impact on Pakistan’s exports. First is the direct impact on trade, stemming from both demand effects and exchange rate effects. China constitutes 10% of Pakistan’s exports.

It said competitiveness of the textile sector, accounting for more than half of all exports, may be affected by recent appreciation of the real effective exchange rate and compensate for slight improvements in competitiveness otherwise.

“Inconsistent trade and industrial policies create disincentives for investors and contributes to weak business environment, as evidenced by Pakistan’s ranking in most international surveys dealing with this issue, like the Global Competitiveness Ranking”, said the World Bank.



The World Bank projected that the trade deficit will widen in the near term but continued remittance inflows are expected to finance much of it. Exports are projected to contract by half a percent in the first year owing to tapered global demand and then grow marginally the following year. Imports, however, are projected to post moderate growth due to China Pakistan Economic Corridor-related investments and higher domestic demand.

Published in The Express Tribune, November 12^th, 2015.

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