KARACHI: Pakistan’s trade with regional countries shows a distressing trend as the gap between imports and exports widened during the first half of the current fiscal year.

The State Bank of Pakistan (SBP) in a report said that exports to two of the largest regional countries, China and India, declined while imports grew rapidly, thus causing a trade imbalance.

In the first half of 2016-17, exports to China slipped to $770 million against $1,028m a year ago. Exports to China fell to $1.9 billion in 2015-16 from $2.69bn in 2013-14.

The government has been trying to develop economic relations with China for the last three years. This has helped China emerge as Pakistan’s largest trading partner.

However, the trade balance is in favour of China while Pakistan is losing its market to Chinese products.

In 2015-16, the trade deficit with China rose to $6.22bn, which was the highest deficit that Pakistan had with any country that year. Chinese investment in Pakistan, however, is not showing encouraging signs. In July-Dec, Foreign Direct Investment (FDI) from China was just $204m against $444m during the same period of the last fiscal year. It shows FDI from China has been falling instead of rising in recent months. Imports from China rose to $8.12bn in 2015-16 from $5.9bn in 2013-14.

Despite worsening political relation with India, Pakistan’s imports from its eastern neighbour were record high at $1.8bn in 2015-16. This indicates that economic relations with the neighbouring country remain intact despite pressure on the government to cut all ties with India.

However, in the first six months of the current fiscal year, imports from India declined to $582m compared to $852m a year ago. During this period, diplomatic relations with India witnessed many snags.

Pakistan’s only significant trade surplus was with Afghanistan. Yet Pakistan’s exports to Afghanistan fell to $529m in the period under review compared to $643m a year ago. A sharp decline in exports to Afghanistan was witnessed in the last fiscal year when they fell to $1.23bn from $1.69bn in 2014-15.

Traders in Karachi said that the country’s exports to Afghanistan are falling because of rising Indian interest in Kabul. This has curtailed the market for Pakistani goods in Afghanistan, they added. However, imports increased to $40m from $37m a year ago.

Trade with Bangladesh could not improve as massive smuggling of goods, particularly garments, continued unabated. Exports of Bangladesh fell to $694m in 2015-16 against $724m in 2013-14. In the first six months of 2016-17, exports fell to $325m compared to $338m in the preceding year.

Published in Dawn, January 28th, 2017