In July-May, trade deficit grew to 43 billion dollars

• Pakistan’s trade deficit increased to $43.3 billion in the first 11 months of this fiscal year, with imports topping $72 billion.
• Exports fell to $2.6 billion in May, reversing a downward trend from the previous month.
• The central bank’s foreign currency reserves have been steadily declining.
• According to PBS, imports climbed 44 percent to $72.2 billion in the current fiscal year’s July-May period.
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• In the first ten months of the current fiscal year, the current account deficit grew to $13.8 billion.

ISLAMABAD: Pakistan’s trade deficit increased to $43.3 billion in the first 11 months of this fiscal year, with imports topping $72 billion, but official foreign exchange reserves fell to a single digit, providing a bleak image of the country’s external sector.

Although exports exceeded the yearly target due to rising global commodity prices, revenues were insufficient to keep the trade gap under control during the current fiscal year’s July-May period, according to the trade summary provided by the Pakistan Bureau of Statistics (PBS) on Thursday.

Exports fell to $2.6 billion in May, reversing a downward trend from the previous month.

According to the PBS, the trade imbalance for the period of July to May was $43.3 billion, up roughly $16 billion, or 58 percent, from the same period the previous year.

Read More: Economy cannot sustain at current trade deficit: FPCCI

The $43.3 billion difference between exports and imports was 153 percent of the yearly estimate for the fiscal year 2021-22, indicating a significant departure from the previous govt’s forecasts.

The central bank’s foreign currency reserves have been steadily declining, and at the end of last month, they were down to single digits, just enough to fund two months’ worth of imports.

Pakistan, on the other hand, hopes to receive some temporary respite once the International Monetary Fund (IMF) programme is restarted and the frozen payments begin to flow again.

However, the country must begin taking steps to alter the current trend of importing everything from consumer to production items from outside, which has exposed Islamabad to numerous shocks.

A few handpicked exporters have impacted the government’s trade policy, putting pressure on the government to extract monetary benefits, and limiting the export base to a few sectors.

It is past time for the government to withdraw roughly Rs100 billion in annual subsidies to exporters, primarily in the textile sector.

According to PBS, imports climbed 44 percent to $72.2 billion in the current fiscal year’s July-May period. According to the PBS, imports increased by $22.2 billion in absolute terms.

Read More: SAPM Buppi says e-commerce can balance Pakistan’s trade deficit

The rate of rising imports has remained high, putting a strain on foreign exchange reserves. The previous PTI administration set a $55.2 billion annual import target, which was met in the ninth month of this fiscal year.

Higher global commodity costs, as well as the country’s incapacity to push through the second phase of industrialisation, contributed to the rise in imports. Pakistan imports virtually everything, including raw materials, intermediate goods, grains, and agricultural inputs.

The government prohibited the import of 41 items last month in order to save $300 million a month, but the impact isn’t significant enough to ease the strain on foreign exchange reserves.

In the first ten months of the current fiscal year, the current account deficit grew to $13.8 billion.

According to the PBS, exports grew over 28% in the first 11 months of FY22, reaching $28.8 billion, up from $22.6 billion in the same period the previous year. The value of exports increased by $6.3 billion in absolute terms.

According to the PBS, imports totaled $6.64 billion in May, an increase of $1.4 billion, or 25%, over the same month a year ago.

Read More: Trade deficit shrinks by 30pc to $3.36bn in January

Last month, goods exports totaled $2.6 billion, up roughly 56%, or $930 million, from the same month the previous year. As a result, the trade deficit increased by roughly 11.5 percent to over $4 billion in May.

Exports fell 10% to $2.6 billion in May 2022 compared to the previous month, a decrease of $296 million. On a month-to-month basis, imports were nearly unchanged from the prior month.

As a result, the trade imbalance increased to $4 billion in May, an increase of over 7%, or $261 million, month over month.

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