Daily Times

Pakistan’s trade deficit during the first 11 months (July-May) of the current fiscal year 2020-21 has surged by 29.48 percent to $27.275 billion as compared to $21.065 billion over the same period of the last financial year.

According to data released by the Pakistan Bureau of Statistics (PBS), between July and May FY21, the import bill increased by 22 percent to $49.839 billion this year as against $40.866 billion over the corresponding months of the last financial year. On the other hand, the exports increased 14 percent to $22.6 billion in the first 11 months of the current fiscal year.

The trade deficit for the month of May 2021 was recorded at $3.43 billion against $1.46 billion recorded in May 2020, showing a massive increase of 134 percent. The deficit remained $2.99 billion in April 2021.

The import bill went up by 77.8 percent to $5.090 billion in May 2021 from $2.863 billion over the corresponding month of last year. On a month-on-month basis, the import bill decreased by 3.23 percent. In May, exports increased by 18.7 percent to $1.65 billion as compared to $1.39 billion in May 2020.

The import bill is rising mainly due to the increased imports of petroleum, wheat, sugar, soybean, machinery, raw material and chemicals, mobile phones, fertilisers, tyres and antibiotics and vaccines. The trade gap has been widening since December 2020. The surge in trade deficit is mainly led by exponential growth in imports with comparative slow growth in export proceeds from the country.

While in FY20 the country’s trade deficit had narrowed to $23.099 billion from $31.820 billion, this target was already crossed in 10 months of FY21, indicating serious pressure on the external side due to rising imports.

The World Bank, however, expected net exports to decline this fiscal year as export volumes are projected to contract, while import volumes grow in line with the domestic demand recovery. “Export values are projected to decline in FY21 amid weak global demand, whereas import values are projected to grow in line with the recovery in domestic economic activity,” the Bank said in its latest country economic update.

The World Bank expected Pakistan’s exports to grow from the next fiscal year onwards, “as external conditions become more conducive and tariff reforms gain traction, but imports are also expected to increase in line with stronger domestic activity and higher oil prices”. It advised the government for tariff reforms to encourage exports growth and support to competition by reducing the anti-export bias of trade policy.