KARACHI: Pakistan's trade deficit has swollen 120 percent in the first two months of the current fiscal year, official data shows, as the country's exports have been outstripped by mushrooming imports.
The trade deficit in July-August was $7.49 billion, according to the Pakistan Bureau of Statistics (PBS), as exports increased only 28 percent year-on-year while imports reached a historic rise of 73 percent.
Pakistan's exports increased to $4.57 billion during the first two months of the fiscal year 2021-22, as compared with $3.58 billion in the same months of the last fiscal year, but on the month-on-month basis in July and August 2021, declined by 14.22 percent and 4.53 percent respectively.
At the same time, the country’s import bill jumped to $12.06 billion during July-August, as compared with $6.99 billion in the corresponding period last year. In August alone, it showed an increase of 95 percent.
The swelling trade deficit, experts say, requires the government to review its strategy.
"At the current pace, account deficit may easily cross over $10 billion (in 2021-22)," Khurram Schehzad, CEO of Alpha Beta Core, a financial advisory platform, told Arab News on Sunday.
Without measures taken to restrict unwanted imports, he said, the country’s current account deficit may even go up further, ending up at $18-19 billion in the fiscal year 2022-23, if the country strives to achieve economic growth of 4-5 percent.
"As economy is picking up pace, trade deficit is widening, which needs to be reviewed critically and focus should remain on increasing exports of goods and services and curtailing luxury imports," Tahir Abbas, research director at Arif Habib Limited, said.
"Trade deficit surged mainly on account of higher commodity prices, increase in oil bill, machinery imports under Temporary Economic Refinance Facility (TERF), and vaccine imports."
TERF is a financing scheme by the central bank to facilitate imported and locally manufactured machinery, which in the longer term is expected to add to the country's economic growth.
Increasing global fuel prices have also contributed to the high imports bill, of which energy contributed 23 percent as of July.
"Every dollar per barrel increase in oil prices increases oil import bill by $1.1 billion," Samiullah Tariq, research director at Pakistan Kuwait Investment said.
He added that while oil prices are behaving well and had gone down from their recent highs, coal, LNG, and palm oil prices have increased significantly.
The decline in export growth has been linked especially to the period's fewer working days.
"July had 20 working days due to holidays, August also had 23 working days which affected productivity," Khurram Mukhtar, patron-in-chief of Pakistan Textile Exporters Association (PTEA) said. "We are expecting a surge in exports from September."
