Trade deficit hits all-time high in November

Published December 2, 2021
This file photo shows shipping containers at a port. — Reuters/File
This file photo shows shipping containers at a port. — Reuters/File

ISLAMABAD: The month of November of the current fiscal year (FY22) saw a steep rise of 162.4 per cent in trade deficit which was driven largely by more than triple increase in imports compared to exports from the country.

The reversing trend in trade deficit was witnessed for the fifth consecutive month as merchandise trade deficit reached $5.107 billion in November against $1.946bn over the corresponding month last year, according to provisional data released on Wed­nesday. This is the highest trade deficit recorded in a single month in terms of value.

The current year started with a rising import bill which poses a serious threat putting pressure on the external side. The import bill in November reached an all-time high of $8.01bn from $4.12bn over the corresponding month last year, indicating an increase of 94.41pc.

Adviser to the Prime Minister on Commerce Razak Dawood said in a tweet that data on imports was being analysed and would be shared shortly. He only shared data on export proceeds in November to portray a positive image of his government.

The highest-ever increase in imports also helped the Federal Board of Revenue collect maximum revenue at import stage — sales tax, withholding tax and customs duty. However, the government’s battle against the bloated trade deficit is reversing and may cause pressure on the external side because of all-time high imports.

The first five months of the current fiscal year saw a rise of more than 117.25pc in trade deficit. The merchandise trade deficit rose to $20.746bn in July-November 2021 from $9.549bn over the corresponding months last year.

The Ministry of Finance believes that an increase in remittances, growth in export proceeds and Roshan Digital Accounts will help mitigate the pressure to a large extent.

Trade deficit had reached an all-time high of $37.7bn in FY18. However, government’s measures led to a drop in it to $31.8bn in FY19 and $23.183bn in FY20. The trend reversed and trade deficit stood 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. The import bill in July-November 2021 rose by 71.59pc to $33.111bn against $19.296bn over the corresponding months last year. In November 2021, the import bill edged up to $8.01bn from $4.12bn over the same month last year, reflecting an increase of 94.41pc.

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 the import bill because of high demand for energy in the domestic market.

A surge was noted in imports of vehicles, machinery as well as vaccines, pushing the import bill. In FY21, the import bill surged by 25.8pc to $56.091bn from $44.574bn the previous year.

Exports posted a growth year-on-year of 27pc to $12.365bn in July-November 2021 against $9.747bn over the corresponding months last year. In November 2021, exports saw a growth of 33pc to $2.903bn against $2.174bn over the same month last year.

Razak Dawood termed the growth in export proceeds in November a historic one, saying the export target for five months was $12.2bn. The monthly target for November was $2.6bn.

Export proceeds went up by 18.2pc to $25.294bn in FY21 from $21.394bn over the last year.

Published in Dawn, December 2nd, 2021

Follow Dawn Business on Twitter, LinkedIn, Instagram and Facebook for insights on business, finance and tech from Pakistan and across the world.

Opinion

Editorial

Budget for stabilisation
Updated 13 Jun, 2024

Budget for stabilisation

The proposed steps lack any “disruptive policy changes", especially to "right-size" the govt, and doubts remain on authorities' ability to enforce new measures.
State of the economy
13 Jun, 2024

State of the economy

THE current fiscal year is but another year lost. Going by the new Pakistan Economic Survey, which maps the state of...
Unyielding onslaught
Updated 13 Jun, 2024

Unyielding onslaught

SEVEN soldiers paid the ultimate price in Lakki Marwat on Sunday when their vehicle was blown up in an IED attack,...
X diplomacy
Updated 12 Jun, 2024

X diplomacy

Both states can pursue adversarial policies, or come to the negotiating table and frankly discuss all outstanding issues, which can be tackled through dialogue.
Strange decisions
12 Jun, 2024

Strange decisions

THE ECP continues to wade deeper and deeper into controversy. Through its most recent decision, it had granted major...
Interest rate cut
Updated 11 Jun, 2024

Interest rate cut

The decision underscores SBP’s confidence that economic stability is gaining traction.