KARACHI: Trade deficit narrowed 1.61 percent to $8.869 billion in the first quarter of the current fiscal year of 2018/19 as regulatory duties snipped non-essential imports into country, analysts said on Wednesday.
Pakistan Bureau of Statistics (PBS) data showed that trade deficit was registered at $9.014 billion in the corresponding quarter a year earlier.
Merchandise exports rose 4.56 percent to $5.39 billion, while imports inched up 0.63 percent to $14.26 billion during the three-month period.
In September, imports amounted to $4.43 billion, almost same as in the corresponding month last year, but noticeably down 11.25 percent over the previous month.
Brokerage Topline Securities said the decline in imports on monthly basis was likely due to lower import of furnace oil “as few power plants were closed amid liquidity constraints due to energy sector’s circular debt”.
Zeeshan Afzal, an executive director at Insight Securities said the monthly number suggested the lowest import of goods since February last year when imports stood at $4.419 billion.
“Rupee depreciation and regulatory duties caused slowdown in imports,” Afzal said.
In 2017, the Federal Board of Revenue issued a list of 731 items, including cars as well as mobile phones on which five to 80 percent regulatory duties were imposed to discourage imports. Growing imports built up pressure on the current account deficit that widened to $18 billion or 5.7 percent of gross domestic product in FY2018, up a hefty 43 percent over the previous fiscal year.
Rupee has lost a cumulative 26 percent against the US dollar since December 2017, which is said to give incentives to export industries.
In September, exports increased 3.55 percent year-on-year to $1.728 billion, while they decreased 11.25 percent over August.
Topline Securities, in a flash note, said the decline over August was likely due to lower exports of agriculture commodities “that may pick up pace going forward as government has recently allowed sugar export of one million tons”.
PBS data showed that trade deficit narrowed 2.43 percent year-on-year and 9.16 percent month-on-month to $2.703 billion in September. Analysts said rupee depreciation would likely to increase cost of doing business.
“But, it can also improve margins of local industries that go for manufacturing import substitutes,” Afzal said.
Analysts said impact of rupee depreciation on export competitiveness depends on in which direction currencies of regional competitors are moving. If their currencies also lose values, rupee deprecation might not be as much beneficial in incentivising exporters as envisaged.