Trade deficit

The Pak Banker - - FRONT PAGE -

The lat­est State Bank fig­ures show that the coun­try's trade deficit soared to all- time high of nearly $ 34 bil­lion in the first 11 months of the cur­rent fis­cal year, posinga se­ri­ous chal­lenge for the govern­ment to cur­tail ris­ing cur­rent ac­count deficit. The deficit widened al­most 13.3 per cent dur­ing the Ju­lyMay pe­riod of the cur­rent fis­cal year. It rose to $ 3.76bn in May, an 8.6pc year- on- year in­crease. The ris­ing trade deficit had been a con­stant headache for the PML- N govern­ment dur­ing its fiveyear term. The last fis­cal year saw the trade deficit rise to an all­time high of $ 32.58bn, rep­re­sent­ing year- on- year growth of 37pc. When the PML- N came to power in 2013, the coun­try's an­nual trade deficit was $ 20.44bn. It has been con­tin­u­ously on the rise since then.

The import bill recorded a growth of 14pc to $55.3bn in Ju­lyMay pe­riod of 2017-18 from $48.54bn over the cor­re­spond­ing pe­riod of last year. On a monthly ba­sis, the import bill recorded a growth of 15pc to $5.9bn from $5.09bn over the pre­ced­ing month.Ac­cord­ing to the com­merce min­istry, the im­ports for the month showed an in­crease of 15pc mainly due to per­sis­tently high oil price and in­creased vol­umes of im­ports of fu­els and ma­chin­ery to over­come en­ergy deficit.The over­all in­crease in im­ports for the eleven months pe­riod re­mained at 14pc as com­pared to the pre­vi­ous fis­cal year. The import bill is ris­ing due to an in­crease in the ar­rival of cap­i­tal goods, petroleum prod­ucts and food prod­ucts.

On the other hand, ex­ports have con­tin­ued to show wel­come growth that be­gan early in 2017. The growth pat­tern in ex­ports has been seen since then with few ex­cep­tions. Ex­ports con­tinue to post the fig­ures above $2bn for the third con­sec­u­tive month since March 2018. The month of May wit­nessed a growth of 32pc year-on-year com­pared to the same month last year.In dol­lar terms, the high­est ever month-on-month growth was recorded as ex­port pro­ceeds went up to $2.14bn from $1.62bn in May 2017, which shows the sta­bil­ity at higher lev­els be­ing re­flected in the ex­port fig­ures.In terms of an­nual ex­port growth, the fig­ures have im­proved from 14pc in July-April to 15pc in July-May. The over­all ex­ports in the first eleven months have al­ready reached $21.32bn, which is al­most $1bn higher than the an­nual fig­ures of 2016-17.

It can be safely pro­jected that the ex­ports for the cur­rent year will sur­pass $23.4bn, bring­ing in an additional for­eign ex­change of around $3bn.The mer­chan­dise ex­ports for the month of May earned Rs247.5bn as com­pared to Rs169.7bn earned in May last year. It shows additional rev­enues of around Rs80bn for ex­porters in the May. Hence in ru­pee terms the growth is a whop­ping 46pc.The rise in ex­ports is the out­come of im­prove­ment in en­ergy sup­ply, partially re­leas­ing of re­funds and cash sub­si­dies un­der the Prime Min­is­ter Ex­port Pack­age. The govern­ment had also im­posed additional reg­u­la­tory du­ties on lux­ury items be­sides restrictions on im­ports of cer­tain goods to cur­tail ris­ing im­ports.

Ris­ing ex­ports should not cre­ate a sense of com­pla­cency. Pak­istan's ex­ports are among the low­est as com­pared to coun­tries in sim­i­lar eco­nomic con­di­tions. We should fa­cil­i­tate our ex­porters in all pos­si­ble ways. Since tex­tiles are num­ber one in the list of for­eign sales we should pay spe­cial at­ten­tion to the prob­lems of cot­ton grow­ing farm­ers ( with the cot­ton sec­tor ac­count­ing for the bulk of our ex­ports). We should al­sore­view the in­dus­trial pol­icy which con­tin­ues to re­main hostage to de­lays in tax re­funds as well as higher costs of pro­duc­tion due to higher in­put costs, es­pe­cially en­ergy.

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