Pakistan Trade Deficit Rises by 39%

In what is seen as a dangerous development for Pakistan’s external sector, the monthly import bill crossed $5 billion for the first time in March, which took the nine-month trade deficit to $23.4 billion—also a new record.

The gap between imports and exports stood at $23.38 billion in the July-March period of current fiscal year, which was 38.8% or $6.53 billion more than the comparative period of previous year, stated Pakistan Bureau of Statistics, APP reported.

It was the highest-ever trade deficit recorded in the country’s history for the nine-month period.

The main reason behind the ballooning deficit was constant double-digit growth in imports and contraction in exports. The nine-month trade gap was $2.9 billion more than the fiscal year’s annual deficit target of $20.5 billion, set by the ministry of finance.

Exports fell 3.1% to only $15.1 billion during July-March 2016-17, which were $478 million less than the shipments made in the comparative period of last year. Imports, however, increased 18.7% to $38.5 billion in the same period. In absolute terms, the import bill was $6.6 billion higher than the previous year.

“This is an alarming situation and the government should immediately call an emergency meeting of the federal cabinet to discuss the deteriorating external sector,” commented Ashfaque Hasan Khan, former economic adviser to the ministry of finance.

He said the trend showed that the import bill would cross $50 billion for the first time and the worrisome element was the contraction in exports.

Exports in the first nine months were about 61% of the annual target of $24.8 billion while imports reached 85% of the annual projection of $45.2 billion.

Slower-than-projected export earnings show that like previous three years, the government will not be able to achieve its annual export target this time again. This comes despite the fact that the government has given two bailout packages to the exporters in the last one year.

These packages had been given without addressing root causes of the persistent decline in exports–high cost of doing business and a lack of enabling environment.

In its latest statement on the state of Pakistan’s economy, the International Monetary Fund has asked Islamabad to remain “vigilant” about the external sector, which is facing problems. However, it gave the warning only after the end of its three-year $6.6 billion bailout package.