Trade deficit swells 11pc to $22.095bln

KARACHI: Pakistan’s trade deficit swelled 11 percent during the fiscal year of 2014/15, official figures showed on Thursday, as fragile textile industry strained the overall exports during the period.
The Pakistan Bureau of Statistics (PBS) data showed that the country recorded trade deficit of $22.095 billion in FY15 as compared to $19.963 billion in FY14.
During the last fiscal year, exports dropped 4.88 percent to $23.885 billion compared with $25.110 billion in the preceding fiscal year.
Analysts attributed the widening deficit to mainly fall in textile exports and appreciation in Pakistan rupee.
“There was a declining trend in exports as the textile sector was hurt mainly due to low demand from European Union and sluggish yarn appetite in Chinese market,” said analyst Zeeshan Afzal at Topline Securities. “Currency appreciation added insult to injury.”
Textile sector forms the major portion of the total exports. According to the PBS figures, June exports stood at $2.016 billion as compared to $1.953 billion in May and $2.018 billion in June 2014.
However, Afzal added that fall in global crude prices augured well for the oil import bill.
In July-June 2014/15, Pakistan’s total imports ratcheted up 2.01 percent to $45.980 billion as against $45.073 billion in July-June 2013/14.
The import bills of June were recorded at $4.394 billion as compared to $3.847 billion in May and $4.318 billion in June 2014.
Muzzamil Aslam, who heads securities think tank Emerging Economics Research, foresees positive exports outlook this fiscal year.
“Developments in energy sector, LNG shipments and materialisation of power projects will give a boost to export sector,” Aslam said.
“The good has already started to be reflecting in the rise in portfolio investment, which depicts the trust of foreign investors in the economy, as well as growth in foreign reserves.” He said portfolio investments currently account for 35 percent of free-float in the Karachi equity market. Unlike foreign direct investment that fell 58.2 percent in the last fiscal, foreign portfolio investment reflects short-term commitment.
Afzal agreed that the positive trade outlook, saying the exports may be normalised as a number of power projects will see financial close this fiscal year to the betterment of manufacturing sectors.
However, he said imports will surge as heavy machineries and power plants are to be imported.
He added that crude prices have already bottomed out.
International gurus said oil prices may not come down, but are likely to remain range-bound for 6-12 months, before supply from Iran can tilt the balance. Iran deal is said to add 60,000 to 80,000 barrels/day oil in the global oil output.