Trade deficit – Journal – DAWN.COM
PAKISTAN’s trade deficit is likely to widen sharply in May, data from the Ministry of Commerce showed on Wednesday. The gap between what the country sells to the world and what it buys from it “ballooned” last month from 134pc to $ 3.4 billion from $ 1.5 billion a year ago. The fact that the country’s import bill for the month rose 77.8% to $ 5.1 billion in the month is attributable to the decline in the import base last year when the bill in imports fell to $ 2.9 billion due to drastically reduced domestic demand from the -19 Covid Pandemic and subsequent economic shutdown to halt the spread of infections. The more than 25% drop in monthly exports also contributed significantly to the widening of the trade gap. The trade deficit has widened since December mainly due to faster growth in imports than exports. Overall, the gap widened 29.5% to $ 27.3 billion in the 11-month period between July and April, from $ 21.1 billion in the same period. from the previous year. Imports rose 22% to $ 49.9 billion and exports 14% to $ 22.6 billion. But the question is: should we be worried about the growing gap between what we import and what we export?
There is not much to fear from the rising import bill. It was expected. Two factors played a major role in the increase in the import bill this fiscal year compared to last year. First, the import of food products, especially wheat and sugar, and cotton pushed imports more than estimated at the start of the fiscal year. Next year, these imports are expected to moderate due to improved domestic crop yields. Second, the resumption of economic activities and a sharp increase in demand for Pakistani exports have resulted in increased imports of raw materials as well as machinery for technology replacement and capacity expansion. In addition, the country’s current account remains in surplus despite the worsening trade deficit, as the increase in remittances more than offset the impact of the increase in imports. The external sector is unlikely to face a serious financing problem over the next two years if remittances continue to grow at the same rate. But long-term balance of payments stability requires the government to stimulate exports through product and market diversification. In addition, it must refine its policies and learn to respect the contracts it enters into with investors to give them confidence and attract longer-term foreign direct investment flows that do not generate debt in order to sustainably develop the economy.
Posted in Dawn, le 4 June 2021