ISLAMABAD - Pakistan’s trade deficit has widened to $23.4 billion during nine months (July-March) of the ongoing financial year due to massive increase in the country’s imports and decline in exports.

The country’s trade imbalance has surged to $23.4 billion during July-March of FY2017 from $16.8 billion of the corresponding period of the previous year showing an increase of 38.8 percent, the latest figures of Pakistan Bureau of Statistics (PBS) said on Tuesday.

The imports increased by 18.67 percent to $38.5 billion during July-March of FY2017 from $32.4 billion of the last year. However, the exports tumbled by 3.06 percent to $15.1 billion in nine months of the current fiscal year from $15.6 billion of the same period of the previous year. The international financial institutions had noted that Pakistan’s current account deficit would enhance due to massive increase in trade deficit and decline in remittances. The increase in current account deficit could hit the country’s foreign exchange reserves, which are already on the declining side.

The International Monetary Fund (IMF) had observed that the current account deficit is expected to reach 2.9 percent of GDP in FY2016-17 owing to a higher trade balance, in part reflecting increased imports of capital goods and energy and stagnant remittances. “The current account deficit is projected to widen to equal 2.1 percent of GDP in FY2017. The deficit increased to $4.7 billion in the first seven months of FY2017, almost double the $2.5 billion deficit in the same period of FY2016. Services and income account deficits worsened as receipts under the Coalition Support Fund were delayed. Meanwhile, the workers’ remittances that critically offset the large trade deficit fell for the first time in 10 years, by 1.9 percent to $10.9 billion, because of declining expenditures and income in oil-dependent Gulf economies,” the Asian Development Bank (ADB) observed in its recent report.

It further noted that the current account balance will likely deteriorate further in FY2018 to 2.5 percent of GDP with somewhat higher global oil prices and accelerating infrastructure investments connected with CPEC. A significant increase in the current account deficit could pose a risk to official exchange reserves, which peaked at $18.9 billion in October 2016 and then slid by $1.3 billion by February 2017.

Pakistan’s exports were continuously declining from last several months. “A third consecutive year of falling exports reflects weak global demand and low international commodity prices but also domestic structural issues such as power outages, scant investment in modernisation, and currency appreciation in real effective terms, all of which hamper competitiveness” the ADB report noted.

However, the country’s exports have started showing growth due to the government’s incentive package worth of Rs180 billion. The PBS data showed that Pakistan’s exports have enhanced by 3.92 percent to $1.8 billion in March 2017 from $1.7 billion of March 2016. Similarly, the imports also recorded an increase of 41.22 percent and reached to $5 billion in March 2017 from $3.5 billion in the same period of the last year. Therefore, the trade deficit recorded at $3.7 billion in March 2017 as against $1.81 billion of March 2016 showing a growth of 77.34 percent.