July 10, 2008	Thursday	Rajab 6, 1429

ISLAMABAD, July 9: With imports not keeping pace with export growth, the country’s trade deficit ballooned to an unprecedented $20.745 billion during the outgoing fiscal year (2007-08) — up by 52.95 per cent from $13.563 billion in the previous year.

High oil import costs continue to increase the deficit, and rising oil prices are making things tough for the government.

The trade deficit climbed to 12.3 per cent of GDP during 2007-08 from 9.4 per cent the previous year. In June, the import bill amounted to $4.025 billion and exports reached $2.053 billion, showing a deficit of $1.971 million.

After missing the target for two years running, exports touched an unexpected $19.22 billion during 2007-08, up by 13.23 per cent from $16.976 billion in the previous year. The target for the outgoing fiscal year was $19.2 billion, which was achieved on the back of rupee depreciation and unexpected growth in exports of non-textile products.

Figures released here on Wednesday by the Federal Bureau of Statistics (FBS) showed that the import bill jumped to an all-time high of $39.968 billion during 2007-08 against $30.539 billion a year earlier --- an increase of 30.87 per cent. For the first time, the government had not set any target for imports during 2007-08.

Analysts said the unprecedented increase in trade deficit was due to a rise in import prices of eight major commodities, inflating the import bill by $4.5 billion.

The import bill of petroleum products swelled by $1.623 billion, petroleum crude $1.150 billion, fertiliser $542.4 million, palm oil $480.8 million, plastic material $117.1 million, medicinal products $76 million, iron and steel $49.5 million and soybean oil by $59.9 million.

On the import of wheat alone, the country spent $800 million to overcome shortage.

Official statistics show the government spent more than Rs40 billion on importing cotton because a pest attack on the crop resulted in lower yields.

The oil import bill for the outgoing financial year is estimated to have swelled to $12 billion, from $7 billion in the previous year -- an increase of 71.4 per cent.

However, the import of industrial raw materials and machinery declined during 2007-08 which also saw industrial output declining by four per cent.

Textile exports have witnessed a negative growth over the past few months and it may not cross even the $10 billion mark this year. The performance of the textile industry was far from satisfactory during the outgoing fiscal year.

An official said that achievement of the export target was the only bright spot, mainly because of depreciation of the rupee and diversification of exports through trade diplomacy of the previous government.

Former commerce minister Humayun Akhtar Khan criticised the previous government’s policy for not depreciating the overvalued rupee against the dollar which, according to him, had affected exports.

He said the last government had focussed on increase in imports to generate maximum revenue and reduce debt-to-GDP ratio. This points to the fact that a natural diversification of exports is now under way -- moving away from conventional textile products to new items, including food and petroleum products. However, the pace of diversification has been slow.

Analysts say that the current food price hike at the international level has provided an opportunity to Pakistani farmers to bring more areas under cultivation.