Trade deficit widens by 21.6pc in 10MFY21

Salman Khan

ISLAMABAD: Pakistan’s trade deficit posted double-digit rise as it widened by 21.6 per cent to $23.83 billion in the 10 months of 2020-21 from $19.59bn over the corresponding period last year, Pakistan Bureau of Statistics (PBS) data showed on Wednesday.

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 exports proceeds from the country.

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

In April 2021, the trade deficit ballooned by 33.24pc to $2.99bn as against $2.24bn over the corresponding month of last year.

Imports jump 17.67pc and exports 13.49pc in July-April FY21

On a month-on-month basis, it dipped by 9.14pc.

The import bill is rising mainly due to the increase imports of petroleum, wheat, sugar, soybean, machinery, raw material & chemicals, mobiles, fertilisers, tyres and antibiotics and vaccines.

The import bill is constantly on the rise for the past few months.

The import bill went up by 60.02pc to $5.18bn in April 2021 from $3.20bn over the corresponding month of last year. On a month-on-month basis, the import bill decreased by 8.34pc. Between July and April FY21, the import bill increased by 17.67pc to $44.706bn this year as against $37.992bn over the corresponding months of last year.

The continuous decline in imports in the first two years of the incumbent government had provided some breathing space to the government in managing external accounts despite a downward trend in exports. However, rebounding imports are likely to create pressures on the external side.

The rise in imports in the coming months will place the incumbent government in real trouble on the external side. However, the growth in remittances at the movement will be sufficient to finance the import bill.

Unofficially, it is believed that the current account deficit in FY21 will remain in the range of $4bn to $6bn by end of June.

Exports posts a growth year-on-year 129.74pc to $2.19bn in April from $0.995bn over the last year. On a month-on-month basis, exports dipped by 7.23pc. The year-on-year growth is mainly because of a substantial drop in exports in April 2020 which provided a lower base for higher growth.

In reality, the month-on-month decline is a worrisome factor for policymakers.

In 10MFY21, export proceeds rose 13.49pc to $20.88bn as against $18.39bn in the corresponding period last year.

The value-added sector has warned the government about a possible shortage of raw materials in the upcoming months. The stakeholders have urged the federal government to allow duty-free import of cotton and cotton yarn.

The Economic Coordination Committee of the Cabinet has allowed import of cotton and cotton yarn from India but the decision was reversed one day after by the federal cabinet chaired by Prime Minister Imran Khan.

The stakeholders had warned that export orders in hand will eventually be diverted to rival countries if cotton yarn is not made available in the required quantity. In the last ECC meeting, government exempted duty and taxes on the import of cotton yarn.

Published in Dawn, May 6th, 2021

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