Trade deficit widens to $3.64bln in Jan as imports continue to outweigh exports

KARACHI: Trade deficit widened 24.4 percent year-on-year to $3.636 billion in January as imports increased more than the exports during the month, official data showed on Friday.

In January, exports rose 11.04 percent from $1.775 billion in the same month a year earlier, Pakistan Bureau of Statistics (PBS) showed. Imports increased 19.37 percent year-on-year to $5.607 billion.

Exports remained flat at $1.971 billion in January as compared to $1.977 billion in the previous month. Imports, however, surged 14.2 percent in the month under review from $4.910 billion in December.

Analysts attributed the growth in imports to capital-intensive inbound shipments.

“Sometime extraordinary items come in. Like military equipment,” Zeeshan Afzal executive director at Insight Securities said.

“We would know for sure on 20th,” Afzal said, referring to upcoming trade data details from PBS and State Bank of Pakistan.

Government is eyeing $25 billion in exports revenue for the current fiscal year and given the recovery trend the target seems achievable – a fact endorsed by the central bank in a latest report on the state of economy.

The government’s export enhancing measures have already started to bear fruits and export growth is expected to narrow the trade deficit.

Exports jumped 11.11 percent to $12.966 billion in July-January period of FY2018. But, imports also climbed 18.92 percent to $34.512 billion during the period under review.

PBS data showed that trade deficit increased 24.18 percent to $21.546 billion in the first seven months of the current fiscal year of 2017/18.

Finance ministry’s chief Miftah Ismail said the current account has posed a challenge in the recent past, “due to increased imports required in the expansionary phase”.

A recent court verdict revoking duties on imports is likely to frustrate the government efforts to arrest growth in imports.

Sindh High Court banned government to collect regulatory duties on non-essential imports and granted the apex tax authority one month period to file appeal against the decision. Meanwhile, importers were directed to deposit half of the regulatory duties to the Federal Board of Revenue and remaining to the court.

In October last year, the government slapped regulatory duties on more than 700 imported goods and was expecting to save around two billion dollars in terms of import bills during the current fiscal year.

Afzal of Insight Securities said the country’s foreign reserves were at a considerably steady level during January, “which show chances of low current account deficit”.

In the first half, current account deficit widened 59 percent to $7.413 billion. January data is awaited.

Meanwhile, exports of services rose 4.72 percent to $2.580 billion in the first half of FY2018, while imports soared 9.01 percent to $5.145 billion, bringing trade deficit in services up 13.69 percent at $2.565 billion during the period under review.

In December, exports of services increased 3.13 percent year-on-year to $471.02 million, while services imports rose 7.34 percent to $907.80 million.

Exports of services increased 18.32 percent month-on-month, while imports rose 4.79 percent in December over November, according to PBS.