Islamabad:
Pakistan’s trade deficit widened from 29% to $ 6 billion in just two months of this exercise due to stagnant exports and a two -figure junction, reflecting the first signs of the government’s liberalization policy.
The Pakistan Bureau of Statistics (PBS) said on Tuesday that the gap between imports and exports had reached $ 6 billion during the July-August period. The deficit was $ 1.4 billion, 29%, more than the comparative period of the last financial year.
The $ 1.4 billion deficit in just two months is also much more than the $ 1 billion loan tranche in the International Monetary Fund (IMF). Pakistan and the IMF start the negotiations for the tranche during the third week of this month.
Imports in the first two months of the current financial year reached $ 11.1 billion, up $ 1.4 billion, or 14.2%, according to the National Data Collection Agency. Imports were also duplicated the total value of exports during this period.
The PBS said exports remained stagnant at $ 5.1 billion in two months, barely 0.7% more than the comparative period.
The stability of the external sector of Pakistan depends largely on the fluid and higher entries in sending foreign funds, because exports do not resume despite multiple initiatives that successive governments have announced over time. Uraan Pakistan of the planning commission and the economic growth plan of Stefen Dercon have also not contributed to considerably stimulating exports.
But exporters complain that the rigidity of the exchange rate erodes their competitiveness. The rupee gradually appreciated after the authorities again intervened to stop the slide by the drop in the local currency.
Rupes-dollas parity closed at Rs281.72 Tuesday, which was better than a day earlier. But during the sharp decrease in the rupee about two years ago, exporters could not take advantage of the situation and the exports remained blocked at around 2.5 billion dollars per month.
As part of the IMF program, the government is committed to reducing import taxes by 52% over five years. Its first phase was implemented in July of this year. The liberalization of exchanges has so far not supported by an increase in exports, which can put the external sector under pressure.
The Ministry of Commerce and the World Bank have planned that the liberalization of exchanges would increase exports by 14% and imports only between 5% and 7% in the medium and long term.
A close control over imports until June had decreased the pressure on Pakistan exchange reserves, but if exports do not take in the coming months, the government may have to review its liberalization of trade.
The PBS said that on an annual basis, exports amounted to only $ 2.4 billion in August, which represented $ 345 million, or 12.5%, less than the same month of last year. Annual export contraction should be a matter of concern for decision -makers.
Unlike export reduction, imports increased by 6.4% to $ 5.3 billion. It was the second consecutive month of this exercise when imports remained above the controlled threshold of $ 5 billion. In absolute terms, imports increased by $ 319 million in a single month.
Consequently, the trade deficit also widened from 30% to 2.9 billion dollars last month. In absolute terms, there was an increase of $ 664 million in the trade deficit. PBS data showed that on a monthly basis, the trade deficit decreased by 8.8%. Exports fell by 10% to 2.4 billion dollars last month compared to July. Imports also decreased by 9.4% to $ 5.3 billion. One of the reasons for the drop in monthly imports was the release of loose cargoes in July, which importers had hidden in anticipation of a tax reduction.
The increase in imports is also reflected in the collection of monthly taxes by the Federal Board of Return (FBR). The FBR has exceeded the objective of collecting customs homework of two months. Against RS192 billion’s objective, the collection of customs duties amounted to 204 billion rupees with growth of 20%. The growth in the collection of customs duties was greater than the growth in the total tax collection of RS1.66 Billions for the period of two months.
