Daily Times

KARACHI: The country’s trade deficit surged to a record $32.6 billion in fiscal year 2016-17 (FY17) as imports outpaced exports significantly, official data released on Tuesday showed.

The $32.6 billion deficit in FY17 was the highest ever in Pakistan’s history, whereas, during the five years’ tenure of Pakistan Muslim League (PML-N) the country’s annual trade deficit surged to $32 billion in FY17 from $20 billion in FY13 despite lower global oil prices.

Trade imbalance of Pakistan widened by 36.32 percent in FY17 compared to $23.8 billion deficit in FY16 while trade deficit stood at $2.7 billion in June 2017, showing 6 percent decline compared to the same month a year ago, according to the data released by the Pakistan Bureau of Statistics (PBS).

Exports fell 1.63 percent to $20.4 billion during July-June 2016-17. The imports continued to surge and reached a historic peak of $53 billion in FY17 showing 19 percent yearly growth against $44.6 billion exports in FY16. Imports of petroleum machinery and chemical items all rose significantly in fact, machinery and petroleum imports contributed around 55 percent to the overall increase in imports.

The State Bank of Pakistan (SBP) in its third quarterly report stated that like many other emerging markets (EMs), Pakistan also faced a challenging export environment over the last two years – with subdued commodity prices, muted demand from key western markets, and decline in shipments to China. However, many of these external dynamics had reversed by mid- 2016 as international cotton prices increased during first half of 2016 and overall imports of key markets like the European Union (EU) also rebounded.

The confluence of these developments and the positive demand shock they generated, have contributed to a recovery in exports of multiple emerging markets second quarter of FY17 onwards.

However, Pakistan’s export performance during this period looks weak, said the bank.

The central bank attributed weak performance to lower unit value f Pakistan’s clothing in key EU market than those of its competitors. Both the product quality and competitive pricing issues seem to be at play here; exporters are also reported to be undercutting their margins by trying to out-price their competitors.

The SBP said that the import bill hit an all-time high, this occurred as non-oil imports kept on their rising trajectory, largely reflecting progress on power generation and road infrastructure projects, as well as capacity expansions and up-gradation pursued by industries like textiles and cement , which boosted machinery imports.

In the month of June, exports stood at $1.91 billion, depicting 16.16 percent yearly growth over $1.6 billion exports recorded in June 2106. Imports surged by 2.16 percent to $4.5 billion in the month of June 2107 as compared to imports worth of $4.4 billion in the same month of previous year.

Published in Daily Times, July 12^th , 2017.