Trade deficit

A decline in trade deficit is normally good news, but not if it shrinks by as much as 27 percent. According to reports, Pakistan’s trade deficit shrank to slightly over $23 billion in the last fiscal year. From July 2019 to June 2020 it was a 27 percent decrease in comparison with nearly $32 billion in the previous fiscal year of 2018-19. The Pakistan Bureau of Statistics (PBS) has released its official data showing that Pakistan exported nearly $21.4 billion worth of goods in the last fiscal year, whereas the target set for such exports was around $24 billion. So, there was a shortfall of $2.6 billion in exports showing a sluggish performance of the sector.

Exports in 2018-19 amounted to $23 billion and the PTI-led government had set a pretty modest increase target in exports of just one billion dollar, but the country’s economy could not even match the previous year’s mark of $23 billion. A nearly seven percent decline in exports is a reflection of the worsening potential of our domestic economy to compete in the world market. In terms of imports the country has seen $44 billion worth of imports compared with nearly $55 billion in the previous year. This decline by nearly 11 billion dollars is not a cause of any jubilation. If the trade deficit declines as a result of an increase in exports, it is good news, but a sharp decline in imports with no substantial improvement in exports shows a faltering economy that can neither export nor absorb import to fuel its potential. Though the government claims that the import bill compressed thanks to the plummeting oil prices in the international market, the fact is that it happened only in the last quarter of the fiscal year from April to June and that was the same period when the Covid-19 pandemic also surged in the country.

The point of concern is that the prices of oil in the international market are bouncing back and the Covid-19 pandemic is also likely to subside, but the economic and financial manager of the country appear to be lacking in initiative to tap the new opportunities. For the time being some relief in debt payments and some new loans have injected a pulse of life into the economy but the country needs a sound strategy to boost exports that will result in better tax collections. Frequent changes in the top slot of the Federal Board of Revenue are another cause of concern. The coming months will be challenging for the economy for the government, and its economic managers must brace for it.