Trade deficit widens to $31b in FY 2020-21

ISLAMABAD – Pakistan’s trade deficit has swelled to $31 billion in the previous fiscal year due to the massive increase in overall imports.

The trade imbalance has recorded at $31.057 billion in year 2020-21 as compared to $23.159 billion in the preceding year 2019-20 showing an increase of 34.1 per cent, according to the latest data of Pakistan Bureau of Statistics (PBS). The trade deficit has swelled due to the massive increase in imports as against the exports.

The country’s exports have increased by 18.11 per cent to $25.268 billion in fiscal year 2020-21 from $21.394 billion in the preceding year. On the other hand, the imports have gone up by 26.42 per cent to $56.325 billion in the last year from $44.553 billion of the preceding year. Therefore, the trade deficit has recorded at $31.057 billion.

The PBS data showed that trade deficit has recorded at $3.594 billion in the month of June 2021 as against $2.104 billion in the same month of previous year with an increase of 70.82 per cent. The exports have enhanced by 68.36 per cent to $2.692 billion in June 2021 as compared to $1.599 billion in June 2020. Meanwhile, the country’s imports have recorded at $6.286 billion in June this year as against $3.703 billion in same month of the previous year showing a massive increase of 69.75 per cent.  

“Exports recovered from negative impact of Covid-19 primarily due to government support for export sector that helped it to capitalize on the market share gain opportunities arising from economic contraction within the region,” the government stated in recent Annual Plan 2021-22. Due to lockdowns in many countries, production slowed down which resulted in shortages and increase in prices of some of the commodities at international level which led to mixed trend in price and quantum effects of selected export items.

The import bill of different groups like food, machinery, transport, textile, agricultural and other chemical group, metal group and miscellaneous has increased mainly due to recovery of the LSM after Covid-19 shock. The price and quantum effects of selected import items showed mixed trend. One of the other factors behind massive increase in imports is food import. The government is continuously importing wheat sugar and pluses to bridge the local shortfall. The surge in imports may be attributed to the rising demand for intermediate goods due to the resumption of economic activities; supply shock in agricultural products especially wheat, sugar and cotton; government’s accommodative measures to underpin the production of industrial sector in the form of removal of customs duty on import of raw materials; and concessionary loans.

The government has noted that Pakistan’s exporters will be facing challenging domestic and external environment. Import demand is likely to increase due to growing aggregate demand through higher project related imports owing to upsized PSDP, but robust growth in remittances is likely to partially offset some of its impact. Resultantly, current account deficit is projected to be at 0.7 per cent of GDP in 2021-22 with projected growth of exports and imports at 6.5 per cent and 9.5 per cent, respectively.

For the current fiscal year 2021-22, the government has set the exports target at $26.83 billion and imports target at $55.266 billion. The trade deficit is projected at $28.436 billion in the ongoing fiscal year.

Article source: https://nation.com.pk/03-Jul-2021/trade-deficit-widens-to-dollar-31b-in-fy-2020-21