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Trade deficit narrows 35pc in May on resurging exports


June 5, 2020

KARACHI: Trade deficit narrowed 35 percent month-on-month in May as exports rebounded 45.4 percent after gradual ease in lockdown and imports fell 11 percent, official data showed on Thursday.

Pakistan Bureau of Statistics (PBS) data showed trade deficit contracted to $1.5 billion in May from $2.2 billion in April. Exports amounted to $1.4 billion, compared to $957 million, while imports declined to $2.9 billion from $3.2 billion.

Analysts see a downward pressure on balance of trade due to improvement in exports following the gradual ease in lockdown imposed late in March after the coronavirus outbreak.

“Global markets started to reopen in early May and that was a reason of recovery in exports,” said Saad Hashmi, executive director at BMA Capital.

Trade deficit sharply narrowed 50 percent year-on-year in May. Exports fell 33.6 percent from $2.1 billion in the corresponding month a year earlier and imports declined 43.2 percent year-on-year, according to the PBS.

In July-May, trade deficit stood at $21.1 billion compared to $29.2 billion in the corresponding period a year earlier, showing around 28 percent contraction. Exports fell seven percent to $19.8 billion and imports decreased 19 percent to $41 billion.

Hashmi sees trade deficit at a satisfactory level and in line with IMF’s structural reforms under a $6 billion extended fund facility program agreed last year.

“Considering the central bank’s trade numbers, we are still behind the (IMF’s) annual benchmark of $20 billion,” he said.

Usually, there was a discrepancy in trade numbers of the PBS and the State Bank of Pakistan (SBP). Alone April’s export data by the SBP showed $400 million more inflows than those reported by the PBS.

The central bank’s May numbers are yet to be made public.

“PBS follows Customs tally and it records data once an exporter logs cargo details with the authorities, while the SBP records foreign proceeds,” explained economist Muzammil Aslam. “Discrepancy might be because of the SBP recording March proceeds realized in April.”

The SBP is optimistic about the export sector’s performance and say exports are improving.

Aslam said everyone knows that industries were only partially opened and then there were Ramzan and Eid holidays when traditionally economic activities happened to be low,” he said. “Yes, demand of surgical items increases and rice prices are on upward trend.”

Analysts said rising oil prices are likely to put pressure on import payments.