ISLAMABAD: Pakistan’s merchandise trade deficit widened by 32.9 per cent, or $7.616 billion, in the outgoing fiscal year (FY21) from a year ago on the back of lower export proceeds and higher than expected imports, data shared by the Ministry of Commerce showed on Thursday.
The annual trade deficit reached $30.796bn in July-June FY21 from $23.180bn over the corresponding period of last year. This may pose some challenges for the government in controlling external accounts.
In rupee terms, the trade deficit was posted at 33.8pc on a year-on-year basis.
The monthly deficit reached $3.333bn in June 2021 from $2.120bn a year ago, reflecting an increase of 57.2pc. In rupee terms, the trade deficit was posted at 50.5pc on a year-on-year basis. In FY20, the country’s trade deficit had narrowed to $23.099bn from $31.820bn in the previous year.
Trade gap has been widening since December 2020, mainly led by exponential growth in imports and comparatively slow growth in exports. The annual import bill went up by 25.8pc, or $11.517bn, to $56.091bn in FY21 from $44.574bn over the corresponding months of last year. In June 2021, the import bill reached an all-time high of $6.052bn against $3.719bn over the last year month, indicating growth of 62.7pc. On a month-on-month basis, the import bill increased by 14pc.
Adviser on Commerce Razak Dawood told a news conference on Thursday that the import bill increased mainly due to wheat and sugar imports. He said the import value of wheat and sugar stood at $1.2bn in outgoing fiscal year.
Commerce adviser says annual goods export of $25.3bn is highest in country’s history
Similarly, he said the import value for cotton stood at $1.2bn due to shortage in domestic production while machinery imports stood at over $8bn — an indication of expansion in industrial base.
The import bill is also rising mainly due to the increased imports of petroleum, soybean, machinery, raw material and chemicals, mobile phones, fertilisers, tyres and antibiotics and vaccines. The growth in remittances at the moment will be sufficient to finance the import bill.
Exports posted a growth year-on-year 18.2pc or $3.9bn to $25.294bn in FY21 from $21.394bn over the last year. In June, export proceeds reached $2.718bn from $1.599bn over the corresponding month of last year, indicating a growth of 70pc
On a month-on-month basis, exports surged by 62.65pc.
The commerce adviser said the value of annul export proceeds is the highest-ever in the history of Pakistan. The exports in June 2021 were also the highest for any month, he further claimed.
The export of services for FY21 is projected to be $5.9bn while the cumulative exports of goods and services during FY21 will cross $31bn.
“This is a remarkable achievement by our exporters considering the difficulties created by the Covid-19 pandemic at home and resultant contractions in our major markets,” Mr Dawood said.
“It was not an easy task as many countries went into lockdown which severely affected the business,” he said. “Not only did our exports survive the crisis but also we have enhanced it in many sectors. I salute our exporters on achieving the milestone,” the adviser added.
Talking about sectoral performance, he said textile exports increased 18.85pc, pharmaceutical 27pc and copper and copper derivatives 44pc, respectively. Meanwhile, he said, rice exports declined 8pc, cotton yarn 2pc, raw leather 16pc and plastic 6pc, respectively.
“With the current measures, exports are expected to grow by 5pc in next two years,” he added.
When asked about the stagnated exports at $25bn for last one decade, the adviser replied that it will take time to boost exports. He started giving reasons of decline in exports since 2013. “We have reversed the trend,” Mr Dawood claimed.
On the issue of non-implementation of The Strategic Trade Policy Framework and Textile Policy, Commerce Secretary Sualeh Faroqui said both policies were under the consultation process with the ECC.
To another question on the EU GSP Plus scheme status, the adviser said he did not expect any change in the policy. “The government is fully engaged with Brussels on the issue of implementation of 27 conventions. There is an issue of five conventions. We are regularly interacting with EU on these issues,” he said.
The adviser further said that preferential trade agreements, along with a transit trade agreement, would be signed with Uzbekistan this month. The Silk road route project needs to be discussed.
He further said transit trade and preferential trade agreements will also be signed with Afghanistan.
Since 2018-19, tariff on more than 4,000 inputs — raw materials, intermediate and capital goods — have been rationalised. As a result, almost 40pc of total inputs in terms of number of tariff lines, as well as value of imports, are at zero per cent duty. This has improved competitiveness of the industry witnessed in 13pc growth in LSM and 17pc increase in exports despite the pandemic.
The adviser said that next year, tariffs on agriculture, iron ore and warehousing will be reduced. Tariffs for pharmaceuticals, footwear, tourism, food processing, and fiber optics have already been reduced in the budget.
He said tariff rationalisation efforts in last two-and-a-half years have brought trade weighted average tariff of Pakistan down from 9.07pc in 2018-19 to 7.07pc in 2021-22. This had brought tariff at par with regional competitors, reduced the cost of manufacturing, generated employment, attracted new investment and enhanced consumer welfare.
Published in Dawn, July 2nd, 2021