Islamabad:
Pakistan’s trade deficit expanded $ 29% to $ 6 billion in just two months of this financial year due to stagnant exports and a double -digit leap in imports, reflecting early signs of government trade liberalization policy.
Pakistan Bureau of Statistics (PBS) said Tuesday that the gap between imports and exports reached $ 6 billion during the July-August period during this financial year. The deficit was $ 1.4 billion, or 29%, more than the comparative period for the last financial year.
$ 1.4 billion higher deficits in just two months is also much more than $ 1 billion loan tranches from the International Monetary Fund (IMF). Pakistan and the IMF will begin negotiations on Tranche in the third week of this month.
During the first two months of the current financial year, imports reached $ 11.1 billion, an increase of $ 1.4 billion or 14.2%, according to the National Data Collection Agency. Imports were also twice the total value of exports during this period.
PBS stated that exports remained stagnant at $ 5.1 billion in two months, hardly 0.7% more than the comparative period.
Pakistan’s external sector stability is largely on smooth and higher influx of foreign transfers, as exports do not derive despite several initiatives that successive governments announced over time. The Planning Commission’s Uraan Pakistan and Stefen Dermon’s economic growth plan have also not contributed to increasing exports significantly.
But exporters complain that currency cure stiffness erodes their competitiveness. Rupee has gradually appreciated after authorities again intervened to arrest the downward slide of the local currency.
Rupee-dollar parity closed at RS281.72 on Tuesday, which was better than a day earlier. But during the steep decline of rupe about two years ago, exporters could not benefit from the situation, and exports remained stuck at around $ 2.5 billion a month.
Under the IMF program, the government has committed to reducing import duties by 52% over five years. Its first phase was implemented in July this year. Handell liberalization is so far not supported by an increase in exports, which can bring the external sector under pressure.
The Ministry of Commerce and the World Bank has expected that trade liberalization would increase exports by 14% and only import in the range of 5% to 7% in the middle to long term.
Tight control over imports until June had reduced pressure on Pakistan’s currency reserves, but if exports do not fetch in the coming months, the government may be undergoing its trade liberalization policy.
PBS said exports year to year amounted to only $ 2.4 billion in August, which was $ 345 million or 12.5%, less than the same month in the last year. The annual contraction in exports must be a matter of concern about decision makers.
Unlike the reduction in exports, imports rose 6.4% to $ 5.3 billion. It was the second consecutive month of this financial year when imports remained over the controlled $ 5 billion threshold. In absolute terms, imports of $ 319 million grew in a single month.
As a result, the trade deficit also expanded over 30% to $ 2.9 billion last month. In absolute terms, there was an increase of $ 664 million in the trade deficit. The PBS data showed that the trade deficit on a month-to-month basis shrunk 8.8%. Exports dipped 10% to $ 2.4 billion last month compared to July. Imports also dropped 9.4% to $ 5.3 billion. One of the reasons for lower monthly imports was clearance of bulk goods in July, which importers had withheld in anticipation of a reduction in taxes.
The increase in imports is also reflected in monthly tax collection of the Federal Board of Revenue (FBR). FBR has surpassed the two -month customs collection target. Against the target of RS192 billion, the Customs Charge Charging RS204 billion was 20% growth. The growth in customs collection was more than the growth of the total tax collection on RS1.66 trillion for the two-month period.
