July trade deficit widens on rising imports

ISLAMABAD: Trade deficit touched $3.10 billion in first month of the new financial year amid booming demand, which is drawing in imports, and the gap could widen further in months ahead as the economy is gradually emerging from the coronavirus hit.

July trade deficit figure was 85.53 percent more than what the economy accumulated ($1.673 billion) in same month a year ago, the Pakistan Bureau of Statistics (PBS) reported Monday.

This deficit figure was around $800 million more than the value of products it sold abroad during July 2021. Whereas, the imports were more than double of exports during the month. Exports were recorded at $2.33 billion while imports stood at $5.434 billion, this huge deficit trend, economists believe could put some pressure on the country’s balance of payment and exchange rate in months to come.

The government’s lax policy for imports has already started showing its impact on the currency and current account deficit by turning it into red.

It is interesting to note that since mid-May 2021, the rupee has been shedding its worth. On Monday alone, it lost 45 paisa or 0.27 percent against the greenback and closed at Rs163.90— the lowest level since 7 October 2021. Rupee has devalued by 3.9 percent since July 1, 2021 to date, and 7.1 percent since its recent high of Rs152.28 recorded on 14 May 2021.

According to the PBS monthly trade bulletin, goods exports in July 2021 up by 16.44 percent to $2.33 billion from $2.0 billion in the corresponding month a year ago, while imports rose by 47.9 percent to $5.43 billion from $3.67 billion in July 2020.

Whereas, comparing goods export in July 2021 with previous month of June, it down by 14.6 percent to $2.33 billion. In June 2021, the economy sold products abroad of $2.728 billion.

Imports during the first month of FY22 were recorded at $5.434 billion as against $6.35 billion in June 2021, down 14.45 percent, while over July 2020 ($3.674 billion), it was up by 47.9 percent.

During the last fiscal 2020-21, the economy witnessed trade deficit of $31.1 billion, which was 34.3 percent more than what was recorded in FY2019-20 ($23.159 billion).

In Last fiscal, imports were recorded at $56.405 billion and exports at $25.30 billion, with trade deficit of $31.1 billion. During FY20, the exports were $21.39 billion, imports $44.55 billion depicting deficit of $23.159 billion.

Meanwhile Pakistan’s international trade deficit in services reduced by around half during financial year 2020-21 over financial year 2019-20, however it is still revealing that Pakistani companies have been taking more foreign services than what it offers in international market.

During FY21, the services trade was recorded at deficit (exports-imports) of $1.875 billion against $3.316 billion in FY20, depicting a reduction in deficit of 43.45 percent. In FY21, the economy hired foreign companies’ services of $7.81 billion, while sold abroad services of $5.94 billion. In FY20, country’s services exports (money inflow) stood at $5.44 billion and imports (outflow) were recorded at $8.75 billion. This represents an increase of 9.2 percent in exports and 10.75 percent decline in imports of services.

During June 2021, services exports stood at $579 million and imports at 597 million indicating a deficit of $18 million. In previous month of May 2021, exports were recorded at $489 million and imports at $852 million with a deficit of $362.96 million. During the month under review, exports up by 18.4 percent and imports down by 30 percent when compared to the previous month.

Comparing June 2021’s services traded performance with the same month of the last year, exports up by 53.56 percent and imports down by 7.3 percent. During June 2020, exports stood at $377 million and imports at $644 million. During the month under review, services trade deficit declined by 93.3 percent from $267 million in June 2020 to only $18 million in June 2021.