ISLAMABAD, Dec 12: Pakistan’s trade deficit ballooned to an all-time high of $8.736 billion during the first five months (July-Nov) of the current fiscal year, up by 20.27 per cent from $7.264 billion over the corresponding period last year.
Due to this highest-ever deficit, Pakistan has already obtained the $7.6 billion loan package from the IMF to avert a balance of payments crisis and default on its foreign debt obligations. The first tranche of $3.1 billion has already been released to Pakistan.
Though the deficit is on the higher side, but a slowdown in import of commodities has been witnessed in the past two months owing to substantial decrease in the price of edible oil, crude oil, steel products and some food items in the international market.
With this decline, the trade deficit narrowed to $1.196 billion in November 2008 from $1.622 billion in November 2007, a decline of 26.24 per cent. This decline accrued as a result of 13.83 per cent dip in imports as it reached $2.723 billion in the month under review from $3.161 billion last year.
Even this decline in imports is more than 21 per cent in the month under review over the previous month.
The slowdown in imports had started since October 2008 owing to decrease in oil prices to less than $50 a barrel and imposition of additional customs duty on imports of luxury items and depreciation of rupee.
“The slowdown in imports of commodities in November was a healthier sign, which was going to reduce pressure on dwindling forex reserves of the country,” an official in the finance ministry said.
The decisions already taken for slowing down imports would be more visible in the months ahead, particularly in December onward, the official added.
Analysts said the government will achieve the target of reducing the flow of imports but its subsequent impact on export proceeds has not been taken into consideration on export proceeds.
The statistics showed that Pakistan exports declined by 0.76 per cent to $1.527 billion in November from $1.539 billion. But in rupee terms there was a substantial growth of 30.03 per cent.
Analysts said the possible reasons for the slight dip in export growth may be because of huge slowdown in imports due to greater cost of borrowing from the banks. This means lesser opening of letters of credit and slowdown of business activities due to the rising cost of doing business, they said.
The decline in exports may also give an alarming bell that the international credit crisis may have impacted Pakistan’s export proceeds from the US and the 27-member European Union, the worst hit targets of the current financial crisis.
Pakistan is also seeking oil imports on deferred payment from Saudi Arabia and Iran, which in case materialises, would also help in reducing pressure on forex reserves. Pakistan’s oil import bill crossed $11 billion mark last year in the wake of highest-ever increase in oil prices.
But the export proceeds recorded a growth of 12.70 per cent to $8.269 billion in July-Nov as against $7.337 billion last year. The government has set an export target of $22.1 billion for the year 2008-09.
Due to slowdown in imports and after the release of the first tranche of the IMF, forex reserves edged up to $9.095 billion on Dec 6, which declined to $3.71 billion on Oct 25.
The finance ministry estimated an amount of $3.5 billion to $4.5 billion to fill a financing gap and $9 billion to $15 billion to avoid a balance of payments crisis and make adjustments over the next two years.