World Economy

With Plunging Exports, Pakistan Trade Deficit Reaches Record High

With Plunging Exports, Pakistan Trade Deficit Reaches Record HighWith Plunging Exports, Pakistan Trade Deficit Reaches Record High

Pakistan’s trade deficit widened to a record high of $20.2 billion during the eight months of the ongoing fiscal year, $5.2 billion higher than the deficit recorded in the comparative period of the previous year and equivalent to the annual projections for the entire fiscal year.

The trade deficit, gap between exports and imports, widened to $20.2 billion during July-February, reported the Pakistan Bureaus of Statistics Saturday, APP reported.

The ballooning deficit may expose vulnerabilities of Pakistan’s economy, as financing such a huge gap in the midst of falling remittances and stagnant foreign direct investment has become a challenge for the federal government. This will increase more reliance on expensive foreign borrowings.

The deficit is close to the $20.5-billion target that the finance ministry had fixed for fiscal year 2016-17, ending on June 30.

Nose-diving exports and skyrocketing imports are the reasons behind the deficit, the highest level recorded in the first eight months of any fiscal year in the country’s history.

The trade deficit during the first eight months of this fiscal year was 34.3% higher than the gap recorded in the same period of the last fiscal year.

Exports plunged 3.9% to $13.3 billion during July-February, $541 million less than the exports made in the comparative period of last year. In comparison, the import bill increased 16% to $33.5 billion in the same period. In absolute terms, the import bill was $4.6 billion higher than the previous year.

Exports in eight months were just 53% of the annual target of $24.8 billion, which shows that like the previous three years, the government would not be able to achieve its annual export target. This comes despite the government giving two-bailout packages to exporters in the last 12 months.

These packages were given without addressing the root causes–the high cost of doing business and lack of an enabling environment.

During the July-January period of the fiscal year, Pakistan imported $6.9 billion worth of machinery, 42.3% higher than the previous year. Machinery import was the single largest charge on the import bill followed by petroleum products that stood at $5.8 billion in seven months.

The imports were three-fourth of the annual projections, suggesting that the country will have a larger than $45.2 billion import bill at the end of the fiscal year.

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