Trade deficit widens sharply in ten months as imports rise

ISLAMABAD: Country’s trade gap widened 64.8 percent to a massive $39.26 billion from July through April 2022, latest numbers showed on Friday, indicating the pressure is mounting on the country’s external balances with each passing day.

This deficit (outflow from the economy) is much higher than what our Pakistanis working abroad are sending back (remittances) to their families each year.

This deficit would pressure our balance of payment position in the months to come, resulting in further depreciation of rupee that may stoke inflation, forcing the central bank to further tighten its monetary policy.

During the first ten months of fiscal year 2021-22, imports surged to a whopping $65.5 billion, while exports clocked in at $26.23 billion, the Pakistan Bureau of Statistics (PBS) reported on Friday.

In the same period of the last fiscal, imports stood at $44.73 billion and exports at $20.91 billion. This translates into a 25.46 percent growth in exports and a 46.4 percent increase in imports.

The trade gap has widened 64.8 percent, or $15.43 billion, from the corresponding period of the last fiscal year.

Goods exports in April 2022 picked up 29.5 percent to $2.873 billion from $2.218 billion in the corresponding month a year ago, while imports rose by 26.2 percent to $6.615 billion from $5.24 billion in April 2021. While comparing trade performance with the previous month, goods exports in April 2022 increased 3.27 percent from $2.78 billion in March 2022. Imports during April 2022 also increased 2.96 percent from $6.425 billion in March this year.

The trade deficit in April 2022 swelled 23.7 percent to $3.74 billion from $3.02 billion in the same month a year ago.

Economists believe that on the demand of the International Monetary Fund (IMF), Islamabad has substantially allowed rupee to devalue against the US dollar -aimed at managing external balance, increasing exports, and cutting imports, but unfortunately, to no avail.

In addition, Covid-19 also played a role in affecting the country's trade performance, as first the international commodity prices heated up and then crude oil also peaked. In the meantime, the international goods transportation costs also jumped several times.

During the last fiscal (2020-21) trade deficit stood at $31.1 billion, 34.3 percent more than the $23.159 billion recorded in FY2019-20.

In FY2021, imports arrived at $56.405 billion and exports $25.30 billion. During FY2020, exports hit $21.39 billion, while imports $44.55 billion, resulting in a deficit of $23.159 billion.

According to trade statistics for international services during July-March 2021-22, local companies imported more services than they exported. The trade deficit in services ballooned 63.64 percent to $3.18 billion in the period under review from $1.94 billion in the same period of FY2021. During this period, the economy imported foreign companies’ services for $8.33 billion, while exported services worth $5.156billion.

In the same period of FY2020, the country’s services’ exports (inflow) stood at $4.404 billion, and imports (outflow) were recorded at $6.347 billion. This represents an increase of 17 percent in exports and 31.3 percent in imports of services.

In March 2022, services exports stood at $668.3 million and imports at $932.1 billion, a deficit of $263.9 million. In February 2022, exports were recorded at $535 million and imports at $825.85 million, with a deficit of $290.9 million. During the month under review, exports went up by 24.9 percent and imports by 12.87 percent compared to the previous month.

Comparing March 2022’s services trade performance with the same month of the last year, exports jumped 20.1 percent, and imports surged 25.3 percent.

In March 2021, services exports stood at $556 million and imports at $744 million, with a deficit of $187.97 million, which brought the deficit to 40.37 percent in March 2022.