Trade deficit widens by 29% in July-Sept as exports decline

Author: By Abrar Hamza

KARACHI: The Pakistan trade deficit increased to the highest point in three months, as gap between exports and imports in the first quarter of current fiscal year 2016-17 (FY17) widened the balance of trade by 29.21 percent.

The trade deficit rose to $7.16 billion in first quarter (July-September) of FY17, 29.21 percent higher than a first quarter FY16 deficit of $5.56 billion, the Pakistan Bureau of Statistics (PBS) reported Friday.

The International Monetary Fund (IMF), in its last review, said exports of Pakistan are small in relation to Gross Domestic Product (GDP) and have been declining; private investment (including foreign direct investment) is too low to support higher growth; public debt is still too high; fiscal revenue, while having increased significantly, remains insufficient to support needed spending on public investment, health and education; and international reserves, despite having tripled over the course of the program, remain below comfortable levels.

“The current account deficit remained contained at 0.9 percent of GDP in FY 2015/16. Slump in exports reflects lower international prices of cotton and rice, a weak business climate, and competitiveness losses from an appreciating real exchange rate. However, low oil prices and still robust remittances from the Gulf Cooperation Council (GCC) countries have offset declining exports”, it added.

IMF said despite a weak cotton harvest and a continued decline in exports, growth is estimated at 4.7 percent in FY 2015/16, supported by buoyant construction activity and healthy expansion of the service sector. Strengthening domestic demand is also indicated by rising domestic machinery imports.

‘Growth will likely increase moderately to 5 percent in FY 17, also supported by an investment upturn related to the China Pakistan Economic Corridor (CPEC)’, said IMF.

The exports fell by 8.92% from $5.24 billion in August 2016 to $4.78 billion in the month of September 2016. Similarly, significant increase in imports by 10.70 percent to $11.84 billion during the third month of new fiscal dampened the Pakistan trade balance. The imports of the country stood at to $10.71 billion by the end of August 2016.

During the month of September 2016, country saw exorbitant decline in exports and considerable increase in imports as Pakistan exported $1.64 billion worth goods to the world that was 11 percent lesser than exports worth of $1.82 billion in the same month of last fiscal.

On the other hand, imports of the country registered 11.47 percent growth to $3.95 billion in the month of September 2016 as compared to $3.56 billion imports in corresponding month of FY15.

As a result, country’s trade imbalance broadened enormously by 33.43 percent in the month of September 2016 to $2.41 billion as against $1.83 billion of September 2015.

However, on monthly basis Pakistan’s trade deficit shrunk by 13.39 percent to $2.41 billion in September 2016 as compared to $2.77 billion trade balance in the month of August 2016.

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