Trade deficit contracts 26.5pc in July-March

ISLAMABAD: Trade deficit narrowed sharply 26.5 percent in the first nine months of the current fiscal year of 2019/20 as imports continued to fall and exports showed a little recovery during the period, official data showed on Friday.

Pakistan Bureau of Statistics (PBS) recorded trade deficit at $17.4 billion in the July-March period compared to $23.6 billion in the corresponding period a year earlier. Exports, during the period under review, amounted to $17.5 billion compared with $17.1 billion a year earlier, depicting a 2.2 percent growth. However, imports fell 14.4 percent to $34.8 billion.

Government took a number of stabilisation measures in the recent past to ease pressure on the external account sector. It tightened regulations on non-essential imports and encouraged exporters to improve foreign exchange earnings. While import cut steps yielded results, export stimulus is yet to noticeably translate into increasing foreign revenue.

In March, exports declined 15.6 percent month-on-month to $1.8 billion. Exports also decreased 8.5 percent in March from $1.9 billion in the same month a year earlier.

Analysts anticipated downward trend in exports to continue in rest of the year in the novel coronavirus-sparked slowdown of global economy.

“Pakistan textile exports, which constitute 60 percent of total exports, are under threats as lockdown measures in major exporting region – US, China, UK, and Germany – resulting delays or cancellation in export orders,” analyst Saad Hanif at Insight Securities said. “Similarly, Pakistan is facing lockdown in its major cities and slowdown in local sales would also be witnessed in coming months.”

Despite currency depreciation, merchandise exports continued to fall as softening international prices forced down the prices fetched by key textile products.

Even if exports remain at the same level of March till June-end, annual exports are estimated to stay flat compared with the last fiscal year.

Businessmen wanted the government to let the industrial sector run its wheels in the difficult times to keep the COVID-19 risks at minimal. They sought deferment of taxes and levies for the time being and settlement of refunds to address their liquidity crunch. “There are still some demand for products like towels and basic cloths,” Hanif said. “However, closedown of plants can result in loss of export orders and hence companies’ profitability.”

PBS data further showed that trade deficit shrank 27 percent month-on-month and 30.4 percent year-on-year in March despite falling exports. Imports witnessed double-digit slide during the month under review. Imports fell to $3.3 billion in March from $4.2 billion in February, showing a 21.2 percent decline. They slid around 20 percent year-on-year to $3.3 billion in March.

Imports were seen falling mainly because of lower international oil prices, rupee depreciation and imposition of regulatory duties.