Trade deficit narrows by 40.6pc to $25.8bn in July-May

ISLAMABAD: Pakistan's trade deficit narrowed by 40.6 percent to $25.8 billion during the July-May period of the fiscal year 2022-23, compared to $43.41 billion in the corresponding period last year, data from the Pakistan Bureau of Statistics (PBS) showed on Friday. The government's policy of limiting imports to manage the balance of payment issue contributed to the decrease in the trade deficit. Total exports from July 2022 to May 2023 fell 12.14 percent to $25.37 billion, while imports shrank 29.2 percent to $51.16 billion.

In May 2023, sales of Pakistani products abroad fell 16.7 percent to $2.186 billion and imports decreased by 36.76 percent to $4.275 billion. The trade deficit in May 2023 narrowed 49.5 percent to $2.1 billion. Comparing monthly trade with the previous month (April), goods exports in May 2023 were up by 2.3 percent and imports increased by 42.6 percent. In April 2023, exports were at $2.14 billion and imports at $2.997 billion.

According to the official data, over the last eight months, exports have consecutively declined. In October 2022, exports shrank year-on-year by 3.25 percent, November 17.6 percent, December 16.3 percent, January 15.4 percent, February 18.67 percent, March 14.76 percent, and April 26.7 percent. Now, exports are down by 12.14 percent over the corresponding months of the last year. The sharp decline in exports over these months can be attributed to various economic challenges, including unprecedented inflation, rupee devaluation, political instability, and shortage of raw materials due to restrictions on imports. Other factors that significantly affected the local production were the higher costs of energy and bank financing within the country. During July-May 2022-23, the average monthly exports were at $2.306 billion, compared to last year's average of $2.625 billion, and the average monthly imports were at $4.65 billion against $6.57 billion in FY22.

With this performance, as one month has left in completing this fiscal, by end of FY23 in June, the total exports shall be $27.7 billion and imports to around $55.8 billion. Since 2003, Pakistan has been running a consistent trade deficit mainly due to high energy imports. China has emerged as the largest trading partner of Pakistan since 2012, replacing the United States. However, the biggest trade deficit was recorded with Beijing, while a surplus was recorded with the United States in recent years. It is to be noted that last year (July-June FY22), total exports were $31.8 billion. In FY22, the trade deficit was at a historic high of $48.38 billion, with imports of $80.18 billion (an average of $6.68 billion per month) and exports at $31.8 billion ($2.65 million per month). In FY2021, exports were $25.3 billion, while imports were at $56.4 billion.