Trade deficit shrinks 13.39pc to $2.315bln in September

KARACHI: Pakistan’s trade deficit shrank 13.39 percent to $2.315 billion in September over the preceding month as the country’s imports fell 10.92 percent to $3.858 billion and exports decreased  6.94 percent to $1.543 billion, official data showed on Friday.

The trade deficit, however, widened 33.43 percent in September over the same month a year ago, said the Pakistan Bureau of Statistics (PBS). The imports rose 11.47 percent in September year-on-year, while exports fell 10.6 percent.  

In July-September of 2016/17, trade deficit also widened 29.21 percent to $7.065 billion. Exports fell 8.98 percent to $4.681 billion in the first three months of the current fiscal year. The country fetched $5.143 billion from exports during the July-September period of the last fiscal year. 

The country’s imports rose 10.7 percent to $10.611 billion during the three months over the corresponding period a year earlier. 

The International Monetary Fund, in its latest paper, said Pakistan’s exports are small in relation to GDP and have been declining. 

The Washington-based lender, in a farewell note at the culmination of its economic review under $6.15 billion loan, said the China-Pakistan Economic Corridor (CPEC) projects, however, have the potential to catalyse higher private investment and exports, which would help cover the CPEC-related outflows that are expected over the longer term.

It said CPEC transport infrastructure projects (e.g. roads, railways, port facility upgrade) would allow easier and lower-cost access to domestic and overseas markets, promoting inter-regional and international merchandise trade.  Service exports would also benefit from the increased trade traffic from China.  

“Reaping the full potential benefits of CPEC will require forceful pro-growth and export-supporting reforms,” it added. 

The imports of machinery and power plants are growing to meet the need of early harvest projects under the CPEC. 

The continuous decrease in exports is blurring the target of $35 billion by the end of June 30, 2018 set under the three-year strategic trade policy framework (2015-18).

The reliance on raw cotton and cotton yarn and cloth exports backfired after the fall in cotton prices in the international market. 

The tax incentives given to textile and other exports under the generalised scheme of preferences plus status by the European Union could not even rescue the export sector.   

The government attributed the exports fall to waning demand in the global market. However, it has failed to explore other export destinations. Its latest trade policy also focused on European Union, Iran and China to increase exports in the short-term. 

The free trade agreement with China has been in the benefit of the neighboring country more than Pakistan. 

Iran and Saudi Arabia, which jointly consume half of the world’s Basmati rice, are, however the markets where the country’s share needs to pushed up from the 0.52 and 4.4 percent, respectively.

Exports diversification is equally important. The government recognised leather, pharmaceutical, fisheries and surgical instruments as sectors with immense export potential. However, their exports are neither increasing. 

Even the incentives to improve the export competitiveness failed to restore the confidence of investors. During the last three years, economic indicators improved, yet the local industries are still reluctant to participate in the balancing, modernisation and replacement, which is crucial to a transition to efficiency-driven economy from the existing factor-driven economy. 

Low oil prices and robust inflows of remittances have offset the decline in exports. But, as the remittances also showed a declining trend in the first quarter and international oil price movement is unpredictable, the export sector must be rescued to save the economy.