ISLAMABAD - Pakistan’s trade deficit widened to $12.1 billion in just four months due to increasing imports of the country putting further pressure on the foreign exchange reserves.

The country’s trade deficit had recorded $12.1 billion during first four months (July to October) of the ongoing financial year as against $9.2 billion of the corresponding period of the last year showing an increase of 31.24 percent. Pakistan’s exports had registered at $7.1 billion during July-October of 2017-18 as compared to $6.4 billion of the corresponding period of the last year showing a growth of 10.04 percent. Meanwhile, the imports had also shown an increase of 22.55 percent and recorded at $19.2 billion during first four months of the current financial year as against $15.7 billion of the same period last year, according to Pakistan Bureau of Statistics (PBS).

The government seems fail in controlling soaring trade deficit of the country despite announcing measures to reduce imports and increasing exports. The Economic Coordination Committee (ECC) of the Cabinet last months had imposed and enhanced Regulatory Duty (RD) on around 731 items in a bid to discourage the surge in import bill. Similarly, the ECC had also approved measures to boost the exports. The ECC approved a proposal that 50 percent of the export package incentive for eligible textile and non-textile sectors, announced in PM’s Export Package, be provided on the same terms as for the period January to June 2017 without condition of increment.  Remaining 50 percent of the rate of incentive would be provided if the exporter achieves an increase of 10 percent or more in exports as compared to the corresponding period of the last year.

The country’s Current Account Deficit is widening due to increase in trade deficit. The World Bank in its recent report noted that wide current account deficit is expected to remain a concern and pressure on international reserves is likely to persist. The pressure on the current account is expected to continue as the trade deficit will persist during FY18 and FY19. This situation could potentially become unsustainable in the absence of timely corrective policy measures. It has projected a 4 percent current account deficit against the official target of 2.6 percent of the GDP. This would mean there will be more pressure on already sliding foreign currency reserves.

The World Bank said that Pakistani rupee is overvalued. Such misalignment can contribute to the buildup of external account pressures and a loss in export competitiveness, leading to a decline in exports. The World Bank said that risk to sudden devaluation of up to 30 percent of the Pakistani rupee against the US dollar is an increase of almost 10 percent in the public debt ratio over the projection horizon. But in the medium term, this would support the external balance through improved competitiveness.

According to the latest data of Pakistan Bureau of Statistics, Pakistan’s exports have enhanced by 7.9 percent to $1.9 billion in October 2017 from $1.8 billion of October 2016. Meanwhile, the imports recorded a growth of 23.6 percent and reached $4.9 billion in October 2017 from $4 billion in the same period of the last year. Therefore, the trade deficit was recorded at $3.04 billion in October 2017 as against $2.2 billion of October 2016, showing an increase of 35.88 percent.