KARACHI, Nov 18: Trade data released by the Federal Bureau of Statistics (FBS) for the month of October shows that trade deficit is continuing to expand. It has increased 248pc year-on-year and 121pc month-on-month.

The increase in imports was mainly attributed to the increase in import value of petroleum products (both in volume and dollar terms) and the increase in machinery particularly textile machinery.

"With international oil prices still at a high-level and expected to go up further due to increase in demand during winter we expect the import bill to maintain upward movement and thus, the increasing trade deficit would continue putting negative pressure on the current account balance and in turn on the balance of payments," commented Arjumand Habib, analyst at First Capital Securities.

The analyst argued that the situation had put significant pressure on the rupee in the last month, which saw a 5.5pc drop in its value against the US dollar. Interventions by the State Bank, such as provision of dollars by the SBP of all oil import bills and tightening of other forex rules to control speculation, have helped in releasing the pressure on the exchange rate that was seen in the last month.

Trade data released by FBS for the month of October shows that exports have fallen both on Y-o-Y and M-o-M, going down 1.3pc and 10.4pc respectively. Imports have increased 35pc Y-o-Y and 15pc M-o-M resulting in a sharp increase in trade deficit of 248pc Y-o-Y and 121pc M-o-M.

The increase in imports continues to be mainly due to the increase in import of petroleum products and the increase in machinery particularly textile machinery. Import of petroleum products have increased in the month both in volume and in dollar terms, recorded at more than double the quantity both Y-o-Y and M-o-M.

The M-o-M decrease in exports is mainly due to decrease in exports of textile products, the impact of which is mitigated by increase in rice and petroleum product exports. For the first four months of the fiscal year trade deficit has increased 355pc Y-o-Y mainly as a result of a 37pc increase in imports.

Murad Ansari, analyst at KASB observed that according to figures released by the SBP, Pakistan's trade deficit had widened by 355pc to $1432m during the first four months of the current fiscal year. Higher oil import bill and import of machinery are the two main factors triggering the higher deficit figure.

Absence of Saudi Oil Facility, which was available till last year, was said to have resulted in higher demand for the US dollar, consequently putting pressure on the rupee. The analyst said he expected trade deficit to widen further during the current year, and exceed the $3bn trade deficit target set by the government for the current fiscal year. The reasons for a wider than targeted trade deficit are listed as higher oil prices compared to last year, and a demand rise in oil could see Pakistan's oil import bill go up by at least 20-25pc.

Furthermore, machinery imports during the current year were also likely to increase the total import bill of the country. "Two cellular operators are planning to begin their operations within the current fiscal year, and majority of the equipment will be imported," said the analyst.

All of that could see trade deficit widen further in the coming months.