Runaway trade deficit may wreck economy: FPCCI

KARACHI: The economy cannot sustain the trade deficit that has widened to $39.3 billion in just 10 months of this fiscal year -about $4 billion/month on average- and will hover around an unprecedented level of $50 billion by FY22-end, an apex trade body official said on Monday.

“The government needs to incentivise and subsidise industrialisation, import substitution, exploration of new markets, and IT exports and facilitate small and medium enterprises in the export-oriented industries for the near-term gains,” said Irfan Iqbal Sheikh, President of Federation of Pakistan Chambers of Commerce and Industry (FPCCI) in a statement.

“Access to finance should be made affordable to create an enabling environment for the businesses to remain competitive in the regional and international markets.” Sheikh noted that the imports were growing twice as fast than exports, nullifying the hard work of exporters in this fiscal year to earn the precious foreign exchange for the country.

“The time has come to take tough decisions swiftly to support exporters as central bank’s foreign exchange reserves at $10.5 billion are not even sufficient to cover two months of imports, while July–April FY22 imports at $65.5 billion show enormous and unsustainable increase of $20.8 billion in absolute terms.”

Keeping politics aside, Sheikh said the government had estimated the total FY2022 imports would be around $55.2 billion; and on the contrary “we have imported $65.5 billion worth of goods in just 10 months”. “This phenomenon needs to be thoroughly assessed and analysed in the broader national interest and strategic measures are a must to ensure the very economic security of the country,” he added.

Sheikh maintained exports in this fiscal year roughly increased 25 percent year-on-year and could continue to do so in the next year as well. “However for that to happen the government will have to create an enabling environment by cutting down the cost of doing business, improving the ease of doing business, ensuring reliable and affordable electricity and gas supplies to the industry, stabilising exchange rate, and presenting a business-friendly budget in consultation with the stakeholders,” the FPCCI official said.

He also explained that only enhancing the exports and bridging the trade gap had the potential to help stabilise the economy. “This goal is achievable if we are able to arrest rupee depreciation, create millions of jobs, and generate hundreds of billions in taxes,” Sheikh said.