Trade gap widens in July-Sept

ISLAMABAD: Pakistan`s trade deficit ballooned by a robust 28.78 per cent in the first quarter this year over last year on the back of higher imports of crude and eatables mirroring global price hike.

The rebound in import bill in July-September period this year sending fears to policymakers that it may in turn pressure the current account deficit, suggested data of the Federal Bureau of Statistics released here on Monday.

In absolute term, the trade deficit in the first quarter went up to $5.114 billion during the quarter from $3.971 billion over the corresponding period last year.

The rising trend in the trade deficit has started in the past few months. But the deficit went all time high in September by 50.34 per cent from a month a year ago as import bill doubled than exports proceeds in the month under review.

The import bill is expected to rise due to higher floods related imports of goods in the Sindh province in the next few months. Food and oil prices are also rising, which will have an impact on the overall import bill of the country in the months ahead. Last year, the trade deficit improved owing to buoyancy in monthly exports growth combined with slowdown in import bill.

The impact of rising trade deficit is vivid from the changes in the current account deficit this year. For the first two months, the State Bank already announced that current account deficit narrowed to $189 million this year as against $1.016 billion over the same months last year.

The remittances, which also influence adjustments in the current account deficit, surged by 39.8 per cent to $2.406 billion during the first two months this year against $1.724 billion over last year. This shows that alone growth in remittances could not stabilise the current account. The major brunt of this slide in current account have been witnessed in the recent depreciation of the rupee and fall in the foreign exchange reserves which crossed all-time high of $18 billion last year.

Statistics showed that exports went up by 18.68 per cent in July-Sept 2011-12 to $6.003 billion as against $5.058 billion over the same months last year. In September, exports rose by 15.25 per cent to $1.836 billion as against $1.593 billion in the corresponding month last year.

For the current fiscal, an export target of $25.618 billion has been projected.

This growth in exports was mainly driven by rise in textile and clothing proceeds. This increase was mainly occurred by rise in cotton price in international market.

On the other hand, import bill up by 23.13 per cent to $11.117 billion in July-September period as against $9.029 billion last year. In September the imports bill reached to $3.622 billion up by 30.24 per cent from $2.781 billion over the corresponding month last year.

A robust import figure of $42.910 billion has been projected for the year 2011-12.

Official statistics showed that the increase in import bill for the current year would mainly be driven by the rising food and oil prices in international market.