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August 5, 2020

Trade deficit narrows 15pc in July as exports rebound

Business

August 5, 2020

ISLAMABAD: Trade deficit narrowed around 15 percent year-on-year to $1.5 billion in the first month of the current fiscal year of 2020/21 as exports bounced back to the positive territory after four months of slump, commerce adviser said on Tuesday.

“This is a great achievement in exports,” Adviser to Prime Minister on Commerce and Investment Razak Dawood said in a tweet. “(This was) in spite of the fact that we still have Covid-related smart lockdowns”

Trade deficit amounted to $1.8 billion in July last year, according to stats shared by the adviser and that are usually classified by the Pakistan Bureau of Statistics (PBS).

In July, exports were recorded at $1.9 billion. That was around six percent growth from $1.8 billion in the corresponding month a year earlier. Imports, on the other hand, fell 4.2 percent to $3.5 billion in July, following the traditional pattern for the last two years. Imports amounted to $3.6 billion a year ago.

“Our export-led ‘Make in Pakistan’ is moving forward,” Dawood said. Export sector has been bearing up with an immense pressure due to uncertainty about the policy direction and macroeconomic-obsessed policies for the last two years.

Rupee slump that normally motivates export sector to expand volume on competitive advantage in international market failed to bring in desirable outcomes from exporters demoralized on unfulfilled commitments.

In FY2020, exports declined 6.8 percent to $21.3 billion. One percent drop was also witnessed in FY2019. The lockdown associated with coronavirus exacerbated already depressed industrial sector in the past four months. A clear conflict of interest was visible in the lockdown-related opinions and actions of the federal and provincial governments, especially Sindh that houses the country’s lifeline city.

Government attributed declining exports to the pandemic crisis developed late in Pakistan compared to other countries. The analysts said the government seems to rely on loans to bolster foreign exchange reserves instead of export sector and that reflected in performance of manufacturing sector.

The incumbent government resorted to curtail imports and mobilise foreign funds to improve balance of payments position since it took over in August 2018. The International Monetary Fund’s loan program opened up inflows from other multilateral and bilateral foreign institutions to currently elevate the foreign exchange reserves to near $19 billion from $14.4 billion till end of the last fiscal year.

However, exports to GDP ratio is teetering below 10 percent. Pakistan’s competing economies in the region are moving towards prosperity because of skilled manpower and growing literacy rate.