January 25, 2008	Friday	Muharram 15, 1429

KARACHI, Jan 24: Trade deficit of the country has further widened by 20 per cent in the first half of the current fiscal year mainly because of sluggish export growth and higher oil import bill.

According to the data released by the State Bank of Pakistan on Thursday export improved by $730 million compared to the first six months of the last year. However, import soared by $1.759 billion during the same period.

Despite record supply of subsidised credit to the export sector by the central bank, the growth remained hopelessly much below the expectations, reaching $8.995 billion during July-December 2007.

The import sharply rose to $15.268 billion against $13.509 billion during the corresponding period of last year. The import bill largely built up owing to costly import of petroleum products. The oil price reached record $100 per barrel last month while the trend is still bullish.

According to data the trade deficit stood at $6.273 billion which is 20 per cent higher against the figures of correspondent months of previous year.

The import bill in first half of the current fiscal year has reached almost 57 per cent of total imports of $26.651 billion in 2006-07.

Contrary to this, the exports grew slightly better which is 53 per cent of the total export of last year.

This comparative study of the figures suggests that the trade deficit could be even higher at the end of the current fiscal year. The reason for this assumption is the rise in imports, led by oil bill. The import of food group would also play a key role in further widening the trade gap.

The food group import reached $1.437 billion, but the wheat was not fully included in this half-yearly balance sheet. It showed that import of wheat carried a bill of only $17 million while the government was still negotiating for importing wheat, despite several assignments have already been booked. The full impact of the wheat import would certainly affect the trade deficit negatively.

The oil import bill, which hit most of the oil importing countries, particularly the developing economies, was significantly higher in the first six months. The total oil import reached $4.369 billion, an increase of $532 million. However, the full impact of the recent rise in oil prices could be felt in the third quarter of the current fiscal year.

The export growth was disappointing for the government. The main export sector, textiles which receives most of the subsidised credit from the banks and the State Bank, could managed hardly to fetch $8.996 billion which is $197 million higher than the figures of the first six months of last year.

The trade deficit has been the main instrument to make the current account balance problematic for the country. The current account imbalances have been met by the higher foreign exchange inflows in the form of remittances, foreign direct investment and sale proceeds of privatisation.