Trade deficit shrinks 1.35pc to $11.9bln in July-Dec

ISLAMABAD: Pakistan’s trade deficit narrowed 1.35 percent to $11.924 billion in the first half of 2015/16 fiscal year, helped by soft oil prices, bolstering the outlook for the country’s current account balance, official data showed on Tuesday.

The Pakistan Bureau of Statistics (PBS) data showed that trade deficit amounted to $12.087 billion in the July-Dec period of the last fiscal year.

Exports fell 14.4 percent year-on-year to $10.322 billion, while imports dropped 7.86 percent to $22.246 billion in July-December 2015.

However, exports, in December, were up 7.58 percent to $1.788 billion over the preceding month and down 16.80 percent over the same month a year ago.

Since July 2015, selling of Pakistani products in international market has been continuously reducing and in the month of July it dipped by 16.9 percent over corresponding month, in August the decline was 3.5 percent, September 20.37 percent, October 11.38 percent, November 15.12 percent and now in December 16.8 percent over same month of the last fiscal.

It is worth mentioning that the government set an export target of $25.5 billion for the current fiscal year.

Last fiscal year, the exports were recorded at $25 billion.

Analysts said the continuous reduction in exports and imports are sending an alarming signal to the government’s policy planners, as they always indicate shrinking economy with low economic activities at home and
less exportable items to
­offer in the international market.

Interestingly, while sensing the negative fallouts of the declining exports on economy and its products’ lower competitiveness in international market due to its high cost of production, Prime Minister Nawaz Sharif last month announced three rupees a unit reduction in base tariff of electricity for industrial
sector that will be
applicable for the electricity consumed in January 2016 and will be billed in February 2016.

Currently, industrial sector is charged with an average tariff of more than Rs. 14 per unit, which has higher peak rates and lower off-peak rates.

After reduction in the base tariff, all the current rates will become lower by an average of Rs. 3 per unit with an average tariff of around Rs. 11 per unit.

It is worth mentioning that reduction in electricity tariff was a major demand of the industrial sector, as in other competing economies of the region including India, Sri Lanka and Bangladesh the cost of this major input was much lower than Pakistan.

This huge difference made manufacturing of value-added textiles and leather – the two prime exports of Pakistan less competitive as compared
to regional competing countries.

According to estimates of industrial and manufacturing exporters of value-added products, the cost of electricity for export-oriented industrial sector in Pakistan is around 86 percent higher than Sri Lankan and more than 45 percent higher than India and Bangladesh,

In Pakistan, per unit cost of electricity is 14 cents, while in Bangladesh it is 7.3 cents, China 8.5 cents and nine cents in India.