ISLAMABAD: The first quarter of the current fiscal year (1QFY22) posted a rise of more than 100 per cent in trade deficit driven largely by an almost triple increase in the country’s imports compared to exports, the Pakistan Bureau of Statistics (PBS) said on Monday.
The merchandise trade deficit reached $11.664 billion in July-September 2021 from $5.814bn over the corresponding months of last year.
The trade deficit poses a serious threat of causing pressure on the external side. However, government officials believe that increase in remittances, growth in export proceeds and Roshan Digital Account will help mitigate the pressure to a large extent.
The rising trend in the trade deficit was consecutively noted in the third month as merchandise trade deficit reached $4.099bn in September from $2.410bn over the corresponding month of last year.
The initial estimates show that the rising import bill might push the current account to $10bn in the FY22.
Trade deficit had reached an all-time high of $37.7bn in FY18. However, the government measures led to a drop to $31.8bn in FY19 and $23.183bn in FY20. The trend reversed and trade deficit was recorded at $30.796bn in FY21.
The trade gap has been widening since December last year, mainly led by exponential growth in imports and comparatively slow growth in exports.
An official of the Ministry of Finance told Dawn that one of the major spendings in September was $448 million on import of vaccines. An almost similar amount was spent on the purchase of vaccines in the month of August.
According to the federal health ministry data, the total number of doses landed in Pakistan stood at 130m. Of these, a donation of 4.7m came from China while another 25.5 m from COVAX while the remaining over 100m doses were purchased.
Exponential growth in imports were blamed for the reverse trend seen in a third consecutive month.
The import bill in July-September 2021 rose by 65.08pc to $18.631bn against $11.286bn over the corresponding months of last year. In September 2021, the import bill edged up to $6.479bn from $4.297bn over the last year.
On a month-on-month basis, the import bill slightly dipped by 1.49pc.
In the outgoing fiscal year (FY21), the import bill surged by 25.8pc to $56.091bn from $44.574bn the previous year.
One of the major initiatives of the government to encourage imports of raw materials also pushed up the import bill. Oil prices have also increased substantially, which pushed up import bill because of high demand for energy in the domestic market.
As per the State Bank of Pakistan’s statistics, around 628 businesses had acquired concessionary bank loans worth Rs435.7bn for setting up new businesses and/or expanding their existing production lines in Pakistan under the Temporary Economic Refinance Facility.
According to the commerce ministry, imports were made on the import of machinery related to textiles, leather, chemicals, etc.
The increase in import bill also helped the Federal Board of Revenue (FBR) to post substantial growth in revenue collection on import stage. It is clear from the robust growth of 34pc on a year-on-year basis to Rs81bn in September. The FBR also collects sales tax and withholding tax at import stage, which gained hefty growth mainly because of rising imports.
Exports posted a growth year-on-year of 27.32pc to $6.967bn in July-September 2021 against $5.472bn over the corresponding months of last year. In September 2021, the exports posted a growth of 26.13pc to $2.380bn against $1.887bn over the last year.
On a month-on-month basis, exports of merchandise increased by 5.92pc. The average monthly exports had stagnated at around Rs2.2bn for the past few years.
An announcement by the commerce ministry said that the growth in exports has been due to the hard work of exporters who deserved praise for this accomplishment.
Export proceeds went up by 18.2pc to $25.294bn in FY21 from $21.394bn over the last year. The commerce ministry has set an export target of $38.7bn for the current financial year. The export target of commodities for FY22 is $31.2bn and that of services is $7.5bn.
Published in Dawn, October 5th, 2021