Pakistan’s service trade deficit decreased substantially by 43 percent during the previous fiscal year 2020-2021 (FY21), according to the data released by the State Bank of Pakistan (SBP).
The improvement was mainly due to the lower international travel payments in the wake of the COVID-19 pandemic.
The SBP data showed a services trade deficit at $1.875 billion during FY21 as compared to $3.316 billion in FY20. This is a decrease of $1.441 billion in deficit.
The lower services trade deficit has also aided in keeping the current account deficit in control, which had fallen by 58 percent to $1.8 billion during the last fiscal year.
Another reason that caused the decrease in the deficit was the direct import-export equation whereby the import payments had dropped by 11 percent as exports recorded 9.19 percent growth during FY21.
In monetary terms, the exports of services showed an increase of $500 million, clocking at $5.937 billion for the period, while the cost of imports went down by $941 million to clock in at $7.812 billion for the year in concern.
The import payments were lowered primarily through reduced air travel, which is not only a significant contributor to import costs, but was also impacted drastically by the pandemic. The payments under this category declined by 33 percent and amounted to $825 million in FY21.
Financial services also showed decreased payments that went down from $468 million in FY20 to $185 million in FY21. Freight import payments also recorded a slight decrease of $87 million to $2.949 billion for the year under concern.
On the other hand, services exports were boosted by the information and communication technology sector. This segment recorded a notable growth of 47 percent in receipts, clocking in at $2.123 billion for FY21, up from $1.440 billion from the year before.