Trade deficit narrows as exports, imports shrink

ISLAMABAD: Pakistan’s trade deficit narrowed in the first quarter of the current fiscal year as exports and imports both contracted, indicating the pace of economic recovery is still sluggish, analysts said.
The Pakistan Bureau of Statistics said on Tuesday the trade gap shrank 14.8 percent to $5.52 billion on lower oil import bill and that was broadly in line with economists' expectations.
The country recorded a deficit of $6.47 billion in the corresponding period of the last fiscal year. Exports fell 13.93 percent to $5.16 billion and imports 14.4 percent to $10.68 billion in July-September 2015/16.
“This shows that the economy is rapidly slowing down,” said Dr Ashfaq Hassan Khan, ex-finance adviser.
Exports, in the month of September, also slowed down 5.6 percent to $1.73 billion as against $1.83 billion in August 2015 and dropped 20.37 percent from $2.17 billion in September 2014.
Imports dipped 8.84 percent to $3.48 billion in September 2015 as compared to $3.82 billion in August 2015, and were down 23.27 percent from $4.54 billion in September 2014.
It is worth mentioning that the government set an export target of $25.5 billion for the current fiscal year. Last fiscal year, the exports were recorded at $25 billion.
Dr Khan said the economies of developing countries are largely dependent on imported raw materials, capital goods and machinery and energy for their growth. “Such a massive decline in imports is a clear indication that Pakistan’s economic activities have slowed down considerably,” he said.
Analysts said the continuous reduction in exports and imports are sending an alarming signal to the government’s policy planners, as they always indicate shrinking economy with low economic activities at home and less exportable items to offer in the international market.
Dr Khan advised the government to follow an expansionary fiscal policy to spur the aggregate demand in the economy, which is very low at the moment. “The government needs to wake up, come out from complacency and change its policy stance,” he added.