Trade deficit widens by 9 per cent to $17.3 billion in eight months

ISLAMABAD – Pakistan’s trade deficit has enhanced to $17.3 billion in first eight months (July to February) of the current fiscal year.

The country’s trade imbalance has gone up by 9 per cent to $17.3 billion in July to February period of the year 2020-21 as against $15.87 billion in the corresponding period of the last year. Trade deficit has widened by $1.43 billion in the period under review. The imports have once again increased more than the growth in exports of the country. 

Pakistan’s imports were recorded at $33.6 billion in July to February period of FY2020-21 as compared to $31.5 billion in the same period of the last year, showing an increase of 6.6 percent. On the other hand, exports have grown by 4.2 percent to $16.3 billion in first eight months of the current fiscal year as compared to $15.64 billion in the corresponding months of the previous year. The official data showed that Pakistan’s exports have increased by only $657 million as against imports, which surged by $2.09 billion in the period under review. 

The widening of trade deficit might put pressure on the country’s foreign exchange reserves. The country’s foreign exchange reserves are currently standing at $20.04 billion by February 19. The breakup of $20.04 billion showed that reserves held by the State Bank of Pakistan (SBP) are $12.91 billion and commercial banks have $7.13 billion, according to the latest data of the SBP. The present reserves level provides the import cover of almost around 3 months.

It is worth mentioning here that Pakistan’s exports for the fifth consecutive month have crossed $2 billion in February this year, according to the official figures. However, exports have shown decline on annual basis. The country’s exports for February this year stood at $2.044 billion as compared to $2.140 billion in same period of the previous year (Feb-2020) showing a decline of 4.5 percent.

Widening of trade deficit might put pressure on country’s foreign exchange reserves

“According to the provisional data, imports during Jul-Feb 2021 of this financial year (FY) increased by USD 2.085 billion as compared to the same period in last FY. The Ministry of Commerce (MOC) has conducted a preliminary analysis of this increase in import,” said Adviser to the Prime Minister on Commerce and Investment Abdul Razak Dawood on Twitter. He further said that it has transpired that most of this growth came from increase in import of raw material intermediate goods, which increased by 7.8%. The import of capital goods declined by 0.2%, while that of consumer goods decreased by 7.3%. 

“This shows that the Make-in-Pakistan Policy of MOC is delivering dividends and industrial activity in the country is increasing. The import bill this year also increased because we had to import wheat and sugar to stabilize the market prices. Cotton was also imported to help the export-oriented industry so that the exports are not hampered,” he said and added that during July-February 2021, the import of wheat amounted to USD 909 million, sugar USD 126 million and cotton USD 913 million (total of USD 1,948 million).

Article source: https://nation.com.pk/03-Mar-2021/trade-deficit-widens-by-9-per-cent-to-dollar-17-3-billion-in-eight-months