Pakistan’s Trade Deficit widened by 29% in August
Islamabad: The improvement in the foreign trade balance proved short-lived as Pakistan’s trade deficit increased 29% to $ 3.5 billion in August after the import bill hit $ 6 billion despite the ban and the erection of non-tariff barriers.
The difference between imports and exports was $ 3.53 billion in August, up 29%, or $ 791 million, on a monthly basis, the Pakistan Bureau of Statistics (PBS) reported Friday. Pakistan’s import bill, which took its step forward in August, surpassed $ 6 billion, exceeding expectations from the government which hoped to tap into last month’s momentum.
According to PBS, August saw a 21% or $ 1.04 billion increase in imports from the previous month. The federal government and the State Bank of Pakistan (SBP) had taken administrative measures to curb imports; a ban had also been put in place which proved largely ineffective.
The central bank also checked almost all letters of credit, imposed import quotas and even restricted imports through open accounts.
While the government lifted the import ban, the other restrictions remain in place after coming under pressure from the IMF and global trading partners. The IMF report released on Friday showed that the IMF backed Pakistan’s request for temporary trade approval under Article VIII of the IMF Memorandum of Understanding until June next year.
The IMF report says that given Pakistan’s early action to partially lift the import ban on luxury and non-essential goods in August 2022 and its renewed commitment to phase out monetary and import-related restrictions if Balance of Payments (BOP) conditions stabilize, restrictions will be supported. A deadline of June 2023 has been set for lifting the above restrictions. With floods devastating crops standing across the country, the import bill is likely to come under pressure again as the country prepares to import additional food supplies.
On a monthly basis, exports increased 11% to $ 2.5 billion in August 2022 from the previous month, an increase of $ 250 million. The sharp decline in exports could also become a concern for the Ministry of Commerce. For the current fiscal year 2022-23, the government has set the trade deficit target at $ 27.8 billion, calling for a 42% reduction from last year’s deficit. The import target for the new fiscal year is $ 65.6 billion, which requires a 22% reduction in the import bill. Over the past fiscal year, Pakistan’s trade deficit has grown extravagantly at an unsustainable rate of more than 55%, reaching a record $48.3 billion thanks to an out-of-control increase in imports that exceeded all official estimates, despite a temporary ban on certain products.
Last year’s widening trade deficit weighed heavily on the country’s foreign exchange reserves, which fell 62% to $7.6 billion last week from their peak of $20 billion in August last year. On an annualized basis, exports rose 11.5% in August, according to PBS, and totaled $2.5 billion from $2.24 billion in the same month last year. In absolute terms, exports increased by $257 million. August imports were $543 million, or 8%, lower than the same month a year ago, according to PBS. As a result, August’s trade deficit narrowed 18.5% year-on-year to $3.53 billion, a reduction of $800 million, according to the national collection agency of data.
Pakistan’s Trade Deficit widened by 29% in August
Overall, the trade deficit for the first two months was $6.3 billion, according to PBS – down 17%, or $1.3 billion – from the same period a year earlier. Exports remained at $4.8 billion, down from just $172 million, or 3.8%, in the July-August period. Imports totaled $11 billion in the first two months, down $1.1 billion, or 9.2%.
