Exports fall for sixth consecutive month in March

ISLAMABAD: Exports fell in March year-on-year for the sixth month in a row, hit by a cooling global economy and a persistent slump in industrial activities in the country, data showed on Monday.

Pakistan exported goods worth $2.367 billion in March, down 14.76 percent from a year earlier, Pakistan Bureau of Statistics (PBS) data showed. The decrease in exports was primarily driven by a decline in textile sales, which make up over three-fifths of the country’s exports.

The monthly trade deficit in March narrowed by 59.75 percent to $1.46 billion from a year ago when it was recorded at $3.63 billion. This was however due to the government’s forced limiting of imports to address the ballooning trade deficit and the dearth of dollars in the country.

The PBS reported that exports in the July-March period shrank by 9.87 percent to $21.05 billion from $23.35 billion in the corresponding month a year ago. Likewise, imports were also down by 25.34 percent to $43.95 billion from $58.86 billion recorded in July-March 2021-22.

In March 2023, exports were down 14.76 percent to $2.367 billion from $2.78 billion in the same month a year ago, while imports dropped 40.25 percent to $3.83 billion from $6.41 billion in March 2022.

Over the last six months, exports declined sharply. In October 2022, exports were down 3.25 percent year-on-year, in November by 17.6 percent, in December 16.3 percent, in January 15.4 percent, February 18.67 percent, and in March exports declined by 14.76 percent over the corresponding month of last year.

In July-March 2022-23, the trade deficit decreased 35.5 percent to $22.9 billion compared to $35.51 billion in the same period last fiscal. Comparing monthly trade with the previous month (February), goods exports in March 2023 were up by 8.03 percent from $2.19 billion in the previous month, while imports were down 5.1 percent from February’s imports of $4.03 billion.

Analysts attributed the decline in exports to a number of factors, including economic structural issues, global economic slowdown, and Pakistan’s over-reliance on a few key exports, such as textiles.

Textiles account for more than 60 percent of Pakistan's total exports. Other factors that have contributed to the decline in exports include a lack of investment in the country's infrastructure, inadequate research and development, poor-quality control, and local high energy costs and bank financing.

Over the last nine months, the average monthly exports were at $2.34 billion, compared to last year’s average of $2.59 billion. Average monthly imports were at $4.88 billion against $6.54 billion in FY22. Due to the poor performance of exports in July-March, it seems unlikely that the economy will reach the $28 billion mark by the end of this fiscal year. Last year’s exports were at $31.8 billion.

In FY22, the trade deficit was at a historic high of $48.38 billion, with imports of $80.18 billion (an average of $6.68 billion/month) and exports at $31.8 billion ($2.65 million/month). In FY2021, exports were $25.3 billion, while imports were at $56.4 billion. Exports increased by 25.6 percent and imports by 42.2 percent. The trade deficit in FY22 was 31 percent higher than the previous year.

Pakistan is facing a balance-of-payments crisis due to a huge trade deficit where imports exceed exports, leading to a decline in the country’s foreign currency reserves and the devaluation of the rupee.

The government is in discussions with the International Monetary Fund to address this issue and has implemented measures to increase revenue and limit imports, including through the use of letters of credit. Additionally, the devaluation of the rupee has made raw material imports more expensive.

To address inflation, the State Bank of Pakistan is increasing the policy rate, with expectations for a further increase of 100 to 200 basis points on Tuesday, as the SBP monetary policy board is meeting in Karachi. These measures are likely to make bank financing more expensive.