Pakistan’s trade deficit shrank by 13.1% to nearly $26.17bn in the first 10 months of this fiscal year, from $30.114bn in corresponding period last year, indicating that government’s corrective measures against trade deficit are bearing fruits. The decline in deficit by $3.944bn in during July-April is estimated to be around $5-6bn by the end of financial year 2019. This contraction is mainly attributable to a steep fall in the overall import bill even though export proceeds posted a mixed trend during the period under review. On a monthly basis, trade deficit dipped by 13.77% to $2.498bn in April, from $2.897bn over same month last year. This improvement has also been shared with the visiting International Monetary Fund team in Islamabad currently negotiating details of a bailout.
A senior official of the Finance Division said that Pakistan is now arguing with the visiting team that soft measures on fiscal side will also yield the desired results. The same official claimed that IMF also acknowledged the country’s position on the external side management. The average current account deficit in the caretaker government (May-July 2018) before the PTI took charge stood at $2.036bn. Had the trend continued, it could have ended up safely at $24.4bn per annum but reversed in the last few months, they claimed. The current account deficit declined $969mn per month on an average in September-March but slowed down to an average $636m a month during January-March financial year 2019. According to the official, the figure will show further improvement in current account when final data are reported for April. As a visible improvement has been seen on current account, the government team is trying to convince IMF over softer measures on the fiscal side to achieve desired results.
Official figures show that the value of imported goods in 10 months was reported at $45.33bn, down 7.87% or $3.875bn, from $49.205bn. In April, imports fell by 7.01% to $4.579bn, from $4.924bn in same month last year.The government believes the corrective measures such as the imposition of regulatory duties on luxury items and automobiles have started bearing fruits. It had also slapped a ban on the import of furnace oil in February. Similarly, the import of used vehicles also dropped significantly owing to change in the mode of import of used vehicles. Other measures that helped in compressions of imports are improved energy supply, import substitution drive, economic stabilisation, and currency devaluation. Data indicates that measures taken in the two supplementary Finance Acts have firmly taken hold and are now effectively curtailing imports as per the policy regime of the government.
Contrary to this, the account on export side is not satisfactory. Meanwhile, exports show a paltry growth of 0.38% in first 10 months of the current fiscal year. In absolute terms, they hit $19.164bn in July-April, as against $19.091bn over corresponding period last year. The export proceeds posted inched up 2.66% to $2.081bn in April, from $2.027bn in same month last year. In rupee terms, the growth was 25.5% during the period. Since February 2019, exports have been on a downward trajectory with Commerce Adviser to Razak Dawood also sharing his concern over the falling proceeds. “The exports are not showing growth the way we are expecting,” he said in response to a question in a press conference. The massive 33% rupee devaluation since July 2018 coupled with cash assistance to major sectors, mainly textile and clothing, wasn’t enough to boost the country’s exports. The government had earlier claimed the impact of currency devaluation will be visible in the export trajectory, anticipating a pickup in foreign sales and a steep decline in imports the months ahead.
Sources and photo-credits: Interviews, Gulf Times