Friday December 09, 2022

Services’ trade deficit widens to $5.17bn in FY2022

August 18, 2022

ISLAMABAD: Pakistan’s services trade deficit widened 105.7 percent to $5.175 billion in FY2022 from $2.516 billion in FY21, chiefly owing to a supply-demand mismatch in the country’s underdeveloped services sector and its opening-up to the outside world.

In FY2022, the economy hired foreign companies’ services for $12.14 billion, while its exports were only $6.97 billion. In FY2021, the country’s services’ exports (money inflow) stood at $5.945 billion and imports (outflow) at $8.46 billion. This represents an increase of 17.2 percent in services exports and 43.5 percent in imports, the Pakistan Bureau of Statistics (PBS) reported.

A cursory look at the data reveals services’ trade in communication, computer, and information services as well as in construction services stood in surplus. While the government services (i.e., remittances received by the foreign missions in Pakistan, military units and agencies, and international organisations), transportation, travel, insurance, financial, and royalties, and licence fees were in deficit during the fiscal year under review.

During FY22, the country had to spend $6.96 billion on transportation accounts (i.e., charter of ships and aircrafts with the crew, freight on commodity imports through sea and air) and postal courier service, whereas, its earnings under this head were only $809.7 million. Thus, the net deficit in the services account due to chartering of vessels for imports and exports shipment was $6.147 billion.

Another factor responsible for big services’ account deficit was a net outflow of $778.9 million on account of overseas traveling. The country had to spend $1.356 billion to finance personal and business-related traveling abroad of individuals and groups, whereas it earned only $541 million.

The same applies to spending on insurance and royalties and licence fees paid to international organisations and their employees operating in Pakistan. During FY2022, the economy’s expenditure under this head stood at $290 million while income stood at $40.1 million.

Earnings under financial services (bank commission, charges, remittances for guarantees, and other services) stood at $112.9 million, while outflows were recorded at $194 million.

On personal, cultural, and recreational services, the country earned $13.1 million, while it spent $1.66 million. Other business services stood at $586.94 million, while outflows under these heads amounted to $53.46 million, $107.59 million, $2.46 million, and $1.052 million respectively. The country also spent $209 million on hiring intellectual services from abroad, while it earned $13.1 million on imparting such services to other countries.

Under the communication, computer and information, construction services, and government services the situation was a little encouraging.

Outflows under the telecommunication, computer, and information heads, stood at $612 million, while inflows (services exports) were recorded at $2.615 billion depicting a trade surplus of $2.0 billion.

Pakistan sold abroad telecommunication services (call centers) for $504.4 million, while it hired the same services for $69.1 million. On computer services, the economy earned $2.106 billion from abroad, while it spent $529.6 million on hiring services. Similarly, on information services (news agency services), the country earned $5.23 million, while it spent $13.3 million by hiring the same.

Pakistanis offered construction services abroad for $94.1 million and hired services for $40.22 million.

Under the head of government services, revenue inflows arrived at $1.08 billion and outflows at $525.9 million. Further, out of this, remittances received by foreign missions in Pakistan came in at $185.4 million, military units and agencies $138.4 million, and others (including remittances received by international organisations, receipt through international bodies and earning of Pakistani diplomatic missions abroad) stood at $756.1 million. Expenditures (outflows) on Pakistani foreign missions abroad were recorded at $43.63 million, while military units and agencies spent $3.89 million, whereas other outflows amounted to $478.35 million.