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Reading: Pakistan’s trade deficit surges to $11.92 billion
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PhotoNews Pakistan > Business > Pakistan’s trade deficit surges to $11.92 billion
Business

Pakistan’s trade deficit surges to $11.92 billion

Web Desk
By Web Desk Published January 13, 2016 5 Min Read
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 Amid increasing concerns over further loss of competitiveness in global markets, Pakistan’s external trade deficit increased to roughly $12 billion during the first half of this fiscal year (Jul-Dec 2015) -$3 billion more than International Monetary Fund’s projections – owing to steep decline in exports.

Although the trade deficit – gap between exports and imports – marginally contracted when compared to the previous period, it was still above projections, offsetting the positive impact of a reduction in crude oil prices.

The IMF has warned that benefits of lower oil prices will continue to be offset by weak performance of exports.

From July through December, the trade deficit amounted to $11.92 billion, reported the Pakistan Bureau of Statistics on Tuesday. It was $163 million or 1.4% less than the comparative period last year. The deficit was $2.9 billion higher than the IMF’s projections that put the first-half gap in exports and imports at $9.1 billion.

In order to offset the impact of higher trade deficit on foreign currency reserves and building a cushion against future trade and external shocks, the State Bank of Pakistan purchased $5.5 billion from the spot market in the first two years of the IMF programme, revealed a recent IMF report.

On the back of falling commodity prices and a strong rupee against other currencies, exports further plunged to $10.3 billion in July-December period, which is $1.8 billion or 14.4% less than the receipts in the comparative period of the last fiscal year, reported the PBS.

Exports were $770 million less than the IMF’s projections.

The PML-N government has failed to announce a three-year strategic trade policy framework. Prime Minister Nawaz Sharif has reportedly scrapped the proposed framework praepared by Ministry of Commerce, terming it unrealistic.

Imports also contracted in July-December period by 7.9% to $22.2 billion -$1.9 billion less than the comparative period. However, these were $2.1 billion more than the IMF’s projections

In its latest report under the ninth review of Pakistan’s economy, the IMF has raised concerns about further loss of competitiveness. “Exports, and consequently (economic) growth will be adversely affected further if Pakistan falls behind its competitors in securing favourable treatment in major markets”, the IMF noted.

In a footnote, the IMF said that Pakistan is not a participant in the forthcoming Trans-Pacific Partnership – a multilateral trade arrangement covering 40% global trade. It said that some of Pakistan’s competitors in textiles and clothing are participating in the arrangement.

Led by the United States, 12 nations mainly from the Pacific Rim have signed the Trans-Pacific Partnership treaty including Vietnam that is a competitor to Islamabad. India and Bangladesh -two other competitors – may also join the arrangement, which could further dent Pakistan’s exports.

While commenting on reasons, the IMF said that the exports declined in first quarter (July-September) owing to falling cotton prices and real exchange rate appreciation. The export competitiveness has suffered from structural factors such as security concerns, power outages, and an unfavourable business climate, as well as from significant real exchange rate appreciation over the past two years, it added.

The real effective exchange rate appreciated by 17% in last two years, said the IMF. Its working suggests that the rupee was overvalued against the US dollar in the range of 5 to 20%, depending upon the methodology applied to work out the real value of the rupee.

On annualised basis, the trade deficit widened to $2.1 billion in December, which was $370 million or 22% higher than the one posted in December 2014, according to the PBS.  The trade deficit widened due to 16.8% reduction in exports and 0.3% growth in imports.

On annualised basis, the exports stood at $1.8 billion in December, $361 less than the receipts in comparative period. Imports last month stood at $3.84 billion.

Read : July-November: Exports have another fall, trade deficit widens to $9.94b
TAGGED:Nawaz SharifPak­istan
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