Raising fears of a gradually slowing economy, the latest figures reveal that the trade deficit has contracted 8.4%, with exports and imports shrinking in the July-August period of the ongoing fiscal year.
According to the Pakistan Bureau of Statistics, receipts from exports stood at $3.43 billion in July-August, one-tenth or $393 million less than the receipts in the comparative period of the previous year. Imports also contracted by 9.2% and dropped to $7.2 billion, $797 million lower than the payments made in the same period of the previous fiscal year, said the national data-collection agency.
The trade deficit in the first two months of the new fiscal year shrank 8.4% to $3.8 billion. It was $344 million less than the previous fiscal year.
Exports have been falling because of a decline in production, an overvalued rupee, loss of competitiveness and an overall slowdown in the global economy, said Dr. Ashfaque Hasan Khan, dean of the School of Social Sciences & Humanities department at Nust. In addition, he said the imports were shrinking because of deflationary trends, which suggested that the domestic economy was also slowing down.
Dr. Khan has been ringing alarm bells about deflationary economic threats, but the Ministry of Finance has not yet acknowledged the challenge. Being a developing country, Pakistan is highly dependent on the import of goods, and a slowdown in imports is one of the few indicators suggesting trends in national output.
Exporters have been complaining about the increasing business costs due to the government’s decision to enhance the electricity and gas tariff rate and the high burden of indirect taxes. In addition, the industry’s cost is also growing by almost 3% annually due to the Federal Board of Revenue’s reluctance to clear pending refunds.
Last month, the PML-N government approved, in principle, a three-year trade policy, fixing the export target at $35 billion for 2018. However, experts have termed it an unrealistic target, set without critically analyzing factors affecting exports.
For the current fiscal year, the government has projected that exports will grow to $25.5 billion or 6.6% up from last fiscal year. However, the IMF estimates show that the export receipts will marginally increase to $24.5 billion.
The trade deficit contracted to roughly $2 billion in August, which is 28.7% or $801 million less than the one posted in August last year, according to PBS.
The major reason behind the massive reduction in the trade deficit was an 18.5% fall in imports. Last month’s exports stood at $1.8 billion, $67 million or 3.5% less than in August 2014.
The trade deficit in August over July widened by 12% due to increased imports and exports. The exports grew 14.8% in August over July, while imports increased 13.4%, data from PBS showed.
Also read:Alarming: Pakistan’s exports plunge to 4-year low
