For the first time in the history of Pakistan, its trade deficit has ballooned to $30 billion. This has been revealed one month before the close of the current fiscal year, which ends in June.
The government has failed to find a solution for the ever-increasing gap between imports and exports, hence the dangerously high trade deficit.
The trade gap between imports and exports has reached $29.99 billion between July to May in the fiscal year 2016-17. The amount is 42.1 percent higher than the same period last year, revealed the Pakistan Bureau of Statistics (PBS).
The gap in imports and exports has broken all previous records for the past three months reaching the ominous $30 billion mark.
Imports remained relatively high, at $5 billion, during the past three months as well.
It should be noted that the Ministry of Finance set an annual target of $20.5 billion for the current fiscal year.
The new statistics have increased concerns over the long-term sustainability of the external sector which is currently maintained by the government through loans from foreign countries and international banks.
Experts claims that cheap imports have started damaging the import-substitution industries. A stable rupee has helped reduce import costs but it still remains above acceptable levels.
The balance of payments for Pakistan are now projected to reach worse levels and the finance ministry has been forced to revise its current account deficit projection to $8.4 billion for the outgoing fiscal year.
Compared to the year before, during May to July FY17:
- Exports fell by 3.1% to $18.5 billion
- Imports increased by 20.6% to $48.53 billion
- Import came out 260% higher than exports
- Exports amounted to only 6% of the GDP, which should be at least 10% for sustainability of a country according to economists
- Imports have already reached 108% of the predicted values while exports are still below the 75% mark
- Lower exports resulted in one-fourth of the export receipts getting used up for debt servicing.
Economists state that the rapidly expanding trade deficit has exposed vulnerabilities in Pakistan’s economy as making up for such a huge gap while foreign remittances and foreign direct investment are slowing down is a daunting challenge for the government.
It will be the fourth consecutive year that the PML-N led government will miss its annual exports target even though Pakistan enjoys duty-free status for its exports in the European Union. Partially funded incentive packages have only caused resentment among exporters and have not helped pickup exports.
Trade deficit in May was 60.8 percent more than the same period last year. It stood at $3.5 billion which was $1.3 billion higher than may 2016. Record imports worth $5.1 billion were the cause behind it as exports dropped by 11% to $1.63 billion in May 2017.