KARAACHI, Oct 12: The first quarter external trade figures released here on Thursday showed that the trade deficit was wider than the corresponding period of previous year as exports grew at a much lower rate than imports.
The export during July-September rose by just 2.8 per cent to fetch a total $4.269 billion. The government has set an export target of $18.6 billion for the current year 2006-07.The import grew by 30.3 per cent to reach $7.429 billion during the quarter. This high import growth resulted in trade deficit of $3.159 billion or 57 per cent.
This trade deficit was also higher than last year. The trade deficit of first quarter 2005-06 was $2.399bn. This quarter trade deficit increased by $760m or 31.6 per cent over last year’s trade deficit during the same period.
The figure showed that the trade deficit was high mainly because of low export growth as the rate of import growth last year was higher than this year.
The export grew by 13.1 per cent last year which concluded with a total export figure of $17.4 billion for 2005-06. Though the government did not set any ambitious export target for the current year, but the rate of low export growth could create problem to hit the target.
However, the widening trade deficit would be more worrisome for the government as it could face serious problems to meet the current account deficit. Last year the trade deficit was over $12 billion which put immense pressure on current account balance but the balance was met with the higher remittances by the overseas Pakistanis, foreign direct investment and privatisation proceeds.
Now the privatisation could hardly yield significant amount for the government as the corruption in Pakistan Steel’s sell-off has put a cork in the process. At the same time, the government has very little to attract foreign investment through privatization.
The State Bank has asked banks to gear up their effort to increase the remittances by the overseas Pakistanis and a target of $6 billion has been set for the current year while a total $4.2 billion was received in this account last year.
Expert said that the import would grow less than the last year as there was a declining trend in the import of machinery. The main importer of machinery was the textile sector which has almost restructured its existing facilities.
However, the last year’s higher import was also because of high oil prices while this year the oil prices have slipped from $78 per barrel to $56 per barrel.
Experts said that the oil prices would significantly reduce the country’s oil bill and ultimately rate of import growth would decline but the poor export growth could further widen the trade deficit.
Our reporter adds from Islamabad: On monthly basis, the import of goods increased by 5.22pc to $2.443 billion in September 2006 as against $2.321bn during the same month last year.
However, the export of commodities declined by 4.53 per cent to $1.416 billion during Sept 2006 as against $1.483bn over the same month last year.
Trade analysts said that the decline in export was eminent because of more than eight per cent decline in export of all textile products including readymade garments.
Moreover, the traditional sectors like footwear, surgical, sports and leather were also witnessing negative growth in export from the start of the current fiscal year.
This negative growth was despite the fact that government had exempted all these sectors from duties and taxes besides six per cent subsidy for the textile sector and a package of Rs25 billion announced recently.
A major question is whether the government policy of subsidies was misdirected or the manufacturers were unable to produce competitive products to compete with other products in international market.
The government has projected the trade deficit at $9.4bn for 2006-07, while the export and import target is $18.6 billion and $28 billion respectively for the current year.
When contacted Dr Ashfaq Hassan Khan, Adviser to Finance Ministry, told Dawn that this year the trade deficit would be down as percentage of the GDP. He said that trade deficit would be curtailed in the months ahead as major decrease in oil prices occurred in international market.
When asked about the possible impact of the trade deficit, the adviser said that the balance of payment was in surplus by $750 million during the first two months of the current fiscal year. He said that the rupee would also remain stable despite the soaring trade deficit.
