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ISLAMABAD: The government is set to reduce overall trade deficit by almost $5 billion by end June despite slowdown in export proceeds, said the Economic Survey 2018-19 released on Monday.

The first 10-month figure showed that the overall trade deficit will drop to a certain level owing to contraction of imports of non-essential luxury items. Last year, the trade deficit reached a historic level of $36bn.

Overall, the trade deficit has decreased by 7.28 per cent in the July-April FY2019 to $23.93bn from $25.81bn in the same period last year.

However, news on the export side is not good despite several measures taken for the promotion of exports from the country. The export target for FY 2019 – which was set at $28bn – is set to be missed as overall exports have slowed down due to global headwinds.

A slowdown in economic growth in the EU along with spillovers from US-China trade tensions led to subdued performance in exports. Textile sector remained the most vulnerable in this gloomy global scenario.

Exports registered a decline of 0.1pc growth during July-April FY2019 as it reached to $19.17bn as against $19.19bn over the corresponding period of last year.

Pakistan is not alone to have witnessed a decline in exports in the region. Indian exports growth level fell to 2pc in Feb 2019 from 18pc in October. Similarly Bangladesh exports growth declined to 7pc from 55pc in January 2019.

According to the Economic Survey 2018-19, exports remained above $2bn in four months of FY2019. However, overall exports dampened due to global headwinds. The government has announced several schemes for promotion of exports.

There is a continuous increase in the flows of credit to private sector in manufacturing and export oriented industry which is a welcome development in terms of business activities. However, the downside risk of the impact of continuous rise in policy rate and global slowdown in trade activities may influence exports.

The establishment of special economic zone and free trade zone at Gwadar will enhance export growth and access to regional markets going forward. The trade diplomacy also needs to be strengthened.

Devaluation has surely increased the cost of imported raw materials. However, this has been largely offset by the generous export incentives provided including larger export rebates, withdrawal of import duties on inputs of raw materials and intermediate goods and, more recently, the issuance of promissory notes against refunds due along with subsidies on gas and electricity consumed. All these measures likely to pay dividend with lag effect.

Import target for FY2019 was set to $ 56.5bn. Between July-April FY2019 imports stood at $45.471bn as against to $49.360bn in the same period last year, showing a decline of 7.9 pc. The reduction in imports is due to decrease in imports of furnace oil, machinery and electric equipment, palm oil and textiles.

Current scenario of declining imports shows that imports will be according to the estimates.

With the falling global demand, weakening consumer and business sentiment among the major economies, trade tensions and economic stabilisation measures at home, the imports are expected to be further decrease.

Additionally, the government has launched an import substitution drive that will be instrumental in reducing pressure on current account.

Published in Dawn, June 11th, 2019