Trade Deficit
ISLAMABAD: In the first quarter of the fiscal year, Pakistan witnessed a significant reduction in its trade deficit, which contracted by 42% to $5.3 billion. This reduction was primarily attributed to a substantial decrease in imports, despite exporters not fully capitalizing on the currency devaluation over the past year.
The Pakistan Bureau of Statistics (PBS) reported that the gap between imports and exports shrank by $3.9 billion, or 42.3%, in the July-September period of the current fiscal year.
During this period, Pakistan imported $12.2 billion worth of goods, marking a decrease of over one-fourth compared to the same period last year. Import expectations had risen after the government lifted regulatory duties and withdrew administrative controls; however, imports during the first three months were only one-fifth of the annual projection of $58.7 billion.
While the reduced imports eased pressure on foreign exchange reserves, which remain at a critical level of only 1.5 months of import cover, the lack of sufficient raw materials continues to affect industrial output in Pakistan.
The textile industry has sought state subsidies in the name of regionally competitive tariffs but struggled to gain support due to the poor outcomes of subsidies they have availed for decades.
Low exports have prevented the government from narrowing its external financing gap, estimated at over $26 billion for this fiscal year.
In September alone, exports totaled less than $2.5 billion, increasing by only $28 million, or nearly 1.1%, compared to the same month last year.
The trade deficit in September narrowed by 48% to just $1.5 billion, reducing by $1.4 billion compared to the same month last year. Similarly, the month-on-month trade gap shrank by 31% as exports increased by 4.1%, and imports fell by 12.7%, resulting in a month-on-month trade deficit of $1.5 billion.
