ISLAMABAD: Pakistan’s trade deficit year-on-year widened by a sharp 106.4 per cent to $25.478 billion which was driven largely by a nearly triple increase in imports compared to exports, showed data released by the Pakistan Bureau of Statistics on Wednesday.

Upward reversing trend in trade deficit was witnessed for the six consecutive month owing to an unprecedented increase in the import values while the exports stagnated at between $2.5bn and $2.8bn a month — mostly semi-finished products or raw materials.

Commerce Adviser Razak Dawood said in a statement that there were indications that the growth in imports had started to decline. During December 2021, Pakistan’s imports decreased by $1bn to $6.9bn as compared to $7.9bn in November 2021.

The import projection for December 2021 was $6.2bn.

Month-on-month it contracts 2.82pc

The merchandise trade deficit swelled by 85.38pc year-on-year to $4.857bn in December. The highest-ever increase in imports also helped the Federal Board of Revenue collect maximum revenue at the import stage — sales tax, withholding tax and customs duty. However, the government’s battle against the bloated trade deficit is reversing and may cause pressure on the external side because of record imports.

However, month-on-month the trade deficit contracted by 2.82pc.

The trade deficit had reached an all-time high of $37.7bn in FY18. However, the government’s measures led to a drop in it to $31.8bn in FY19 and $23.183bn in FY20. The trend reversed and the trade deficit stood at $30.796bn in FY21.

The trade deficit is expected to reach an all-time high by the end of June 2022.

The import bill in July-December 2021 rose by 65.94pc to $40.580bn against $24.454bn over the corresponding months last year. In December 2021, the import bill edged up to $7.597bn from $4.986bn over the same month last year, reflecting an increase of 52.37pc.

The current fiscal year started with a rising import bill putting pressure on the external side.

One of the major initiatives of the government to encourage imports of raw materials also pushed up the import bill. Oil prices have also increased substantially, which pushed up the import bill because of the high demand for energy in the domestic market. A surge was noted in imports of vehicles, machinery as well as vaccines, pushing the import bill.

In FY21, the import bill surged by 25.8pc to $56.091bn from $44.574bn the previous year.

Exports posted year-on-year growth of 24.71pc to $15.102bn in July-December 2021. In December 2021, exports saw a growth of 15.8pc to $2.740bn from $2.366bn in the same month last year. On a month-on-month basis, exports declined by 5.55pc in December.

Export proceeds went up by 18.2pc to $25.294bn in FY21 from $21.394bn over the last year.

According to the commerce ministry, the exports of fish & fish products, plastics, cement, fruits & vegetables, petroleum products, natural steatite, etc increased. In terms of market diversification, there was an increase in exports to Bangladesh, Thailand, Sri Lanka, Malaysia, Kazakhstan, South Korea, etc.

In the traditional sectors, there was an increase in the exports of men’s garments, home textiles, rice, women’s garments, jerseys & cardigans and T-shirts. However, exports of fruits & vegetables, surgical instruments, electrical & electronic equipment, tractors, pearls and precious stones decreased in December 2021 as compared to the same month last year.

Published in Dawn, January 6th, 2022