Challenging trade dynamics to widen current account gap in FY17

Author: By Abrar Hamza

KARACHI: While previous fiscal saw the continuation of a longstanding decline in Pakistan’s share in global trade, foreign trade statistics of current fiscal depicts gloomy picture too as trade deficit increased further by 22 percent in the July-October period.

World Bank (WB) projects subdued growth in exports and accelerated growth in imports are expected to lead to a widening of the current account deficit from 1.1 percent in Fiscal Year 2016-17 (FY16) to 1.7 percent in FY17.

Exports from Pakistan to the world shrunk by 6.31 percent in July-October of Fiscal Year 2016-17 (FY17) to $6.43 billion as compared to $6.86 billion worth of exports in corresponding period of previous fiscal. Importers remained active in the said periods as Pakistan imported $15.75 billion worth of goods which were 8.60 percent higher than imports value of $ 14.50 billion in same period of FY16.

The increasing gap between exports and imports enlarged the trade imbalance of the country in the period under review as it settled at $9.31 billion, 21.99 percent higher than trade deficit of $7.63 billion in same period of FY16, the Pakistan Bureau of Statistics (PBS) reported Thursday.

“Pakistan has lagged behind its competitors in trade openness, reducing its prospects of regaining export momentum. Pakistan’s decline in competitiveness has been driven by poor trade facilitation, infrastructure gaps, inefficient logistics and a poor investment climate as the. ‘Pakistan has also lagged behind its competitors in trade openness, reducing its prospects of regaining export momentum. The simple average tariff has fallen only slightly from 14.4 percent in FY13 to 13.4 percent in FY16”, says a new WB Report

This trend is a combined reflection of Pakistan’s weakening export competitiveness and soft global demand in key sectors. Food and textiles, in particular, are key contributors to Pakistan’s exports and continue to suffer from a decline in international prices and demand, said WB.For example, although Pakistan exported more rice in FY16 than in FY15, lower international prices translated to a lower total value of rice exports.

‘More generally, Pakistan’s decline in competitiveness has been driven by poor trade facilitation, infrastructure gaps, inefficient logistics and a poor investment climate’.

On the other hand, the exports rose by 13.80 percent from $1.54 billion in September 2016 to $1.75 billion in the month of October 2016. Similarly, significant increase in imports by 4.35 percent to $4.02 billion during the fourth month of new fiscal dampened the Pakistan trade balance. The imports of the country stood at $3.85 billion by the end of September 2016.Thefore, on monthly basis, trade balance in October 2016 as compared to October 2016 narrowed by 1.94 percent to $2.27 billion.