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Pakistan trade deficit widens

$20 billion gap will lead to a drawdown on $9.4 billion foreign currency reserves

An employee working at a textile factory in Karachi. pakistan exported $25.2 billion worth of goods compared to imports valued at $45.2 billion in 2013-14 that ended on June 30. — AFP

Pakistan’s trade deficit widened to $20 billion in the last fiscal year, far more than the official and International Monetary Fund (IMF)’s projections but marginally lower than the preceding year, as the government missed its first year’s export target.

The figures released by the Pakistan Bureau of Statistics (PBS) showed that the country exported $25.2 billion worth of goods compared to imports valued at $45.2 billion, leaving a gap of $19.98 billion in 2013-14 that ended on June 30.

Compared to the preceding year, the trade gap contracted by 2.5 per cent, but it was far higher than the official and the IMF’s projection of $16.6 billion, suggesting the fixing of an unrealistic target by the PML-N government. The IMF too could not accurately project the trade gap.

The higher projected trade deficit will have a direct bearing on the country’s balance of payments position. The State Bank of Pakistan on Monday withdrew the balance of payments figures after releasing it in the morning.

Against the target of $26.6 billion, exports reached $25.2 billion at the close of fiscal year 2013-14, up 2.8 per cent over $24.5 billion worth of shipments a year earlier, according to the PBS. The government has projected 3.6 per cent growth in exports.

It is not the first important target that the government has missed. Earlier, it missed key targets such as economic growth rate, investments, savings, inflation and foreign direct investment.

The import bill remained at $45.2 billion, showing a marginal growth of 0.36 per cent, higher than the IMF and official projections. The government had projected a $43.3 billion import bill in its annual plan while the IMF had estimated imports at $42.7 billion.

Missing the trade deficit target by a wide margin will increase the current account deficit — the gap between external receipts and payments.

Higher-than-projected current account deficit will lead to a drawdown on foreign currency reserves held by the State Bank of Pakistan, currently standing at just $9.4 billion. For the new fiscal year, the government has projected a trade deficit of $17.2 billion. It aims to take exports to $26.9 billion while the import bill could reach $44.2 billion.

Month-on-month trade figures showed that imports grew 18 per cent and stood at $4.33 billion in June over May. In June, exports contracted by 4.3 per cent to $2.1 billion over the previous month.

The trade deficit in the month alarmingly widened by almost half and stood at $2.3 billion on the back of dipping exports, according to the PBS.