KARACHI: No macro indicator of the economy shows positive signs particularly on the external front as the trade deficit in the first half of the current fiscal year FY23 remained at $17.13 billion.

The finance minister on Wednesday once again assured the nation that the country would not default on external payments but the media reports indicate the imports were suppressed so hard that exports started falling making it counterproductive to bring down trade and current account deficits.

The data released by the Pakistan Bureau of Statistics showed that both exports and imports fell during the first half of the current fiscal year by 5.8pc and 22.6pc to $14.3bn and $31.4bn, respectively.

This created a wide gap of $17.133bn, which is 33pc lower when compared to $25.438bn in the same period last year.

The change is visible and it will surely reduce the current account deficit (CAD) but the government with poor foreign exchange holdings of $5.8bn was not in a position to meet even the reduced deficit. The CAD during July-Nov FY23 was $3.1bn.

The trade deficit in December fell by 41pc to $2.86bn year-on-year but increased by 2pc month-to-month. This was due to a decline of 3.64pc in exports while imports increased by 0.41pc.

The imports have been declining due to tough restrictions imposed by the State Bank of Pakistan to save its melting dollar reserves, but the move has drastically hampered economic activities as some key industrial raw materials were barred taking a direct toll on exports.

On Dec 27, the central bank eased imports of several essential items required as raw materials and some basic needs for the exporters. In May and July 2022, banks were bound to seek a prior permission from the SBP before initiating any import transaction.

SBP has allowed imports of essential food items like wheat, edible oil, and raw matrials for pharmaceutical secotr including life-saving/ essential medicines, surgical instruments including stents, etc.) The SBP also allowed imports by export-oriented industries.

Published in Dawn, January 5th, 2023