Pakistan’s Trade Deficit Continues To Reach Record High – Research Snipers

Pakistan’s Trade Deficit Continues To Reach Record High

pakistan imports

Economic situation of Pakistan is often viewed by the projects it is involved in for the long term growth, the development of CPEC is no doubt a precursor in economic growth of the region. But the real statistics in the economy itself shows some damaging picture ahead.

Trade deficit which is in layman’s language is the value of imports exceeding the value of exports. This gap between the imports and exports creates imbalance in the economy. In simple words Pakistan’s imports cost more and the money outflows becomes greater as compared to money inflows that are generated with exports.

Read More: Economic Situation Of Pakistan In 2017

This deficit in trade reached $26.6 billion in the last fiscal year. As compared to last period there was an increase of this deficit by $7.6 billion according to PBS figures. This was the highest level of trade deficit in the history of country during 10 months.

Economic experts are now raising fingers at finance ministry to follow the policy to maintain the strong rupee, which eventually hurts import substitution industries due to cheaper imports.

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Constantly, growing imports are the main reason for trade deficit, finance ministry seems to lose grip of the trade deficit targets set for the year.

This is an alarming situation, the balance of payments would go beyond the levels that were projected by the government.

Current Problematic Situation

The projected current account deficit is $3.7 billion higher than finance ministry’s estimates, This will continue to hit foreign currency reserves and increase external borrowings.

Exports and Imports

Exports fell by 2.3% reaching $16.9 billion during the period July-April, which were $396 million less than the previous period last year. On contrary, imports increased by 20% to $43.4 billion during the period July-April.

The actual problem is with unprecedented growth of imports, bare in mind these imports are not related to Pak-China corridor project. CPEC only accounts for one fourth of total imports, it is worth mentioning that the imports also increase due to CPEC project but that shouldn’t be the actual reason for growth.

The root cause is strong rupee against dollar, imports become cheaper if Rupee has strong position, importers start piling up imports thinking that the Rupee can become weaker any time soon in the future.

Government policy

Government should revisit its policy to maintain the balance between imports and exports, apart from imports related to CPEC other imports should be controlled.