Trade deficit

The PTI-led government’s policy of imports liberalisation is not different from the one followed by the previous governments that turned the nation into an import-based consumer market. During the period between July 2020 and January 2021, Pakistan’s export earnings recorded a rise of only $0.7 billion. On the other hand, during this period, the import of cotton alone cost $1 billion to the country. It is being speculated that the import of cotton may reach $3 billion by June. Owing to this wide gap between exports and imports, the trade deficit swelled to $2.8 billion and $2.6 billion respectively in the months of December 2020 and January 2021. Between August 2018 and November 2020, the country’s imports were compressed. This particular step played the key role in managing external account stability. The trade deficit declined sharply while the current account turned surplus. But the trend seems to have reversed in the last two months with a sharp rise in the import bill, primarily from consumer goods, marking the return of the current account deficit that has haunted the nation for years. The rising import bill, the wide trade gap and the re-emergence of current account deficit pose serious risks to the economy.

Arif Majeed

Karachi