The trade deficit of the Pakistan is now projected to levels never anticipated by the finance ministry. In recently ended fiscal year 2017-2018 Pakistan has reported its highest figure of the history of trade deficit of 37.7 billion. This trade deficit is resultant of USD 60.9billion imports and devaluation of Pak currency up to 15%. So, Pakistan is spending foreign currency more that it is earning. When outflow of foreign currency is greater than inflow of foreign currency trade deficit occurs. In others words we can also say that trade deficit results from when imports of a country are much more than its exports. In this situation outflow of foreign currency is greater than inflow.

In order to overcome situation of trade deficit Pakistan relies on its foreign exchange reserves and make payments through it. If Pakistan keeps doing this than foreign exchange reserves will start depleting and will reach a dangerous level soon. At this level of trade deficit authorities must have to take initiative to take back the figure to the normal. Otherwise this will result for a new IMF loan or a mini budget. This worsen level of trade deficit shows that policy makers are paying less attention to private sectors to give relaxation in different aspects so the local firms can produce substitute to the imported products. Trade policy set export target of USD 35billion by 2018, but due to weak policies exports remain far below than the set target. The main reason behind this trade deficit is no effective measures were taken to resolve the issues of key exporters. Our government had played role in widening trade deficit by not focusing on export policies. The major issue behind this consists of some structural factors and lack of good policies. Due to this lack of focus on policies in 21 century the major exports of Pakistan still based on cotton, yarn and cloth. The previous government has managed this temporarily by taking loans from other countries but this will not serve as a permanent solution to this alarming situation. Another reason which gave raise to imports is cheap products of china. So it is important to control imports.

In order to control trade deficit government and policies markers need to pay attention to this issue. There is a need to reduce our imports and increase our exports. Previous and present both governments have given some incentives to the exporters but still unable to overcome the issue. The present government of PTI has protected thebenefits that were also provided to exporters by previous government. There are five sectors which are exempted for rise in prices of oil, gas and electricity. This incentive would be give to other item to encourage manufacturing of export quality goods. In this way exports can be increased. Accordingly, there is need to revise policies and reform policies to avail opportunities available in future.

Advance technology is one of the most growing opportunities in world wide. Country need to point out sectors in which our supply lines can be improved and enhanced with other countries in a profitable manner. Institutional reforms would be a key to achieving these policy objectives.

Policies makers of Pakistan need to design these types of policies and make sure implementation to encourage exports. In order to reduce imports regulatory duties can be increased on unnecessary item this will result in under invoicing. Another way is to set a limit on number of items so any importer who import more than specified limit would be charged with double import tariffs.

According to analysis in the starting tenure of government of PTI the trade deficit has drop down by USD 2.7 billion in the month of September. The main reason is that PTI government has increased duties on unnecessary imported products which result in decrease in trade deficit.


Lahore, December 17.