KARACHI: Imports in the second half of the outgoing fiscal year increased significantly, reflecting the easing of restrictions by the State Bank of Pakistan (SBP) on the International Monetary Fund’s directions.

The country’s import bill surged to $17.92bn in January-April compared to $25.462bn in July-December FY24.

Currency experts said the interbank market was experiencing higher demand for dollars from importers, but the State Bank succeeded in stabilising the exchange rate at the current level. The IMF had demanded easing import curbs before reaching a Staff-Level Agreement to release the final tranche of $1.1bn under the $3bn Stand-By Arrangement.

Bankers said imports rose, but restrictions are still in place to bring down the trade deficit and get control over the current account deficit. The average monthly imports rose by $244m to $4.481bn in January-April from $4.237bn in the first half.

According to the SBP data, total imports were $43.353bn in 10MFY24 against exports of $25.669bn, resulting in a trade deficit of $17.684bn.

During the current fiscal year, exports did not do a miracle to increase dollar inflows, while imports slightly decreased to $45.7bn.

Exports grew during 10MFY24 mainly due to higher food exports, reaching $5.963bn compared to $3.92bn last year, led by rice shipments totalling $3.063bn.

Pakistan must improve its dollar reserves to meet the estimated $25bn debt servicing in FY25. Remittances slightly increased by 3.5pc to $23.8bn during the 10MFY24, while foreign direct investment also noted a nominal increase of 8pc to $1.45bn.

“The threat over exchange rate under the present poor inflows and reserves could be true in FY25 and the dollar may reach Rs330 as per the estimate of the IMF,” said a banker.

The financial sector did not take reports of the UAE’s $10bn investment commitment seriously.

“We have seen this kind of promise for billions of dollars in the past, but they never materialised. This $10bn is also a MoU for Pakistan, and the government is using it to reduce the stress on the external front,” said the banker.

Published in Dawn, May 26th, 2024