Exports up 10pc in July-Oct; trade deficit widens 31.2pc

KARACHI: Merchandise exports rose 10 percent to $7.1 billion in the first four months of the current fiscal 2017/18, while imports also increased 23 percent to $19.2 billion.

Pakistan Bureau of Statistics (PBS) data on Monday showed that trade deficit widened 31.2 percent to $12.1 billion in the July-October period of FY2018. Trade deficit stood at $9.2 billion in the same period a year earlier as exports amounted to $6.4 billion and imports stood at $15.7 billion.

In October, exports increased 13 percent month-on-month (MoM) to $1.9 billion and imports rose 10 percent to $4.9 billion bringing the monthly trade deficit at three billion dollars, up nine percent MoM. Exports edged up eight percent year-on-year (YoY) in October, while imports swelled 24 percent jacking up trade deficit by 36 percent YoY.  

Analysts said increase in exports was due to low base effect. Exports continued to decline during the last fiscal year. Adnan Sheikh, an analyst at Topline Securities said exporters are slashing their profit margins to boost exports in order to benefit from 10 percent rebate.

In January, the government announced Rs180 billion worth of Prime Minister Trade Enhancement Initiative that promised rebate for exporters who would increase their exports by 10 percent till the end of FY2018.

Sheikh said the increase is mainly recorded in readymade garments segment, which is a key value-added textile sector. Jawed Bilwani, chairman Pakistan Apparel Forum agreed that profit is low.

But he said low profitability is due to high cost of inputs as compared to regional competitors.   “There is a progress (in exports),” Bilwani added. “Orders are high in numbers.” Analysts, however, see continuous growth in imports due to China-Pakistan Economic Corridor projects.

“Rebound in international oil prices may also offset the benefits of the measures to contain imports,” Ahsan Mehanti, chief executive officer at Arif Habib Commodities said, referring to regulatory duties imposed by the government on non-essential goods.

Government is expecting an import bill reduction between one to two billion dollars for the current fiscal year, owing to the regulatory duties. Mehanti said the regulatory duties are on luxury goods and so the impact might not come up to the expectations.

PBS stats further showed that the country earned $1.3 billion through exports of services in the July-September period, depicting a six percent increase over the same period a year ago.

In July-September, services import also increased six percent to $2.5 billion. Trade deficit in services widened six percent to $1.2 billion in the first three months of FY2018.

In September, exports of services increased 13 percent MoM to $457.8 million, while imports of services decreased 15 percent to $733.2 million, slashing trade deficit in services by 40 percent to $275.4 million. Trade deficit in services also slid 26.2 percent YoY in September as services exports rose 9.5 percent and imports of services fell 7.3 percent.