Trade gap widens 133pc to $ 4.05 billion in August – Journal
ISLAMABAD: The second month of the current fiscal year saw a 133 percent increase in the trade deficit largely due to an almost triple increase in the country’s imports relative to exports, according to provisional data released Wednesday.
The reverse trend was noted in the trade deficit for the second consecutive month as the merchandise trade deficit reached $ 4.05 billion in August from $ 1.740 billion in the corresponding month last year.
The trade deficit could lead to pressure from the external side, but government officials believe that increased remittances, growth in export earnings and the Roshan digital account will help ease the pressure to a large extent.
Early estimates show that the rise in the import bill could push the current account to $ 10 billion in FY22.
The trade deficit had reached an all-time high of $ 37.7 billion in FY18. However, government measures reduced to $ 31.8 billion in FY19 and to $ 23.183 billion. in fiscal year 20. The trend reversed and the trade deficit was recorded at $ 30.796 billion in fiscal year 21.
The exponential growth of imports is responsible for the trend reversal observed for the second consecutive month
The trade gap has widened since December last year, mainly due to exponential growth in imports and relatively slow growth in exports.
The import bill in August rose 89.9% to $ 6.313 billion from $ 3.324 billion in the corresponding month last year. On a monthly basis, the import bill increased by 12.7 pc.
In the outgoing fiscal year (FY21), the import bill jumped 25.8% to $ 56.091 billion, from $ 44.574 billion the year before.
Trade and investment adviser Abdul Razak Dawood told Dawn he was doing an analysis of the rise in imports. He said the maximum imports included raw materials and capital goods because industries were working at full capacity.
The government has carried out maximum tariff rationalization on raw materials and capital goods over the past two years to boost the country’s industrialization. “It will be a game-changer,” the adviser said, adding that it was the silent revolution in the country’s history due to cheaper imports.
Mr Dawood said that according to statistics from the State Bank of Pakistan, around 628 companies have acquired concessional bank loans worth Rs 435.7 billion to start new businesses and / or expand their lines. existing production facilities in Pakistan under the Temporary Economic Refinancing Facility.
He said that the imports were made on the import of machinery related to textiles, leather, chemicals, etc. He said machinery imports consist of multiple products. “It is a positive sign for the economy,” he said.
The adviser said oil prices have also risen significantly, pushing up the import bill due to the high demand for energy in the domestic market. He said the government had a back-up plan to keep pressure from outside.
The rising import bill also helped the Federal Board of Revenue (FBR) show substantial growth in revenue collection at the import stage. This is clear from the robust growth of 67% recorded in customs collection alone in August compared to a year ago.
The FBR also collects sales tax and withholding at the import stage, which have experienced strong growth mainly due to increased imports.
Exports grew 42.5 percent year-on-year to $ 2.257 billion in August, from $ 1.584 billion in the corresponding month last year. On a monthly basis, merchandise exports fell by 3.54 pc.
Average monthly experts had stagnated at around 2.2 billion rupees in recent years. An announcement from the Commerce Ministry said export growth was affected by shipping delays due to heavy rains. August exports are $ 143 million short of the monthly target of $ 2.4 billion, he said.
“I urge exporters to redouble their efforts to market their exports in order to achieve our goal,” Dawood said in a Twitter message.
Export earnings rose 18.2 percent to $ 25.294 billion in FY21, from $ 21.394 billion last year. The Commerce Department has set an export target of $ 38.7 billion for the current fiscal year. The export target for raw materials for fiscal 22 is $ 31.2 billion and that for services is $ 7.5 billion.
Posted in Dawn, le 2 September 2021