The latest news on the trade account of the country is simply frightening. According to the data released by the Pakistan Bureau of Statistics (PBS) on 13th November, 2017, trade deficit of the country jumped to dollar 12.129 billion during July-October, 2017 from dollar 9.242 billion in the corresponding period of last year, showing an increase of 31.24 percent. Pakistan's exports rose to dollar 7.1 billion during the first four months of the current fiscal as compared to dollar 6.4 billion for the same period of last year, while imports posted a hefty growth of 22.55 percent from dollar 15.7 billion to dollar 19.2 billion. On a monthly basis, trade deficit soared to dollar 3.04 billion in October, 2017 which was higher by 35.88 percent over dollar 2.2 billion registered in the same month of last year. Exports recorded a growth of 7.89 percent to reach dollar 1.9 billion while imports shot up by 23.6 percent to stand at dollar 4.9 billion. Trade deficit during October, 2017 was also higher by 8.68 percent than the previous month.
The latest trend in trade deficit of the country is alarming, to say the least. In the year 2016-17, trade deficit was recorded at dollar 32.58 billion, showing a year-on-year growth of 37 percent but if the present trend persists, it may reach a new high this year. Although home remittances, which are an offsetting factor, are also increasing, their rate of increase is woefully insufficient to cover the aggregate trade deficit with the result that current account deficit could be much higher than last year or projected for the current fiscal. Imports are growing due to higher prices of oil in the international market, rise in non-fuel imports like machinery, including those for CPEC-related projects, keenness of importers to build inventories and increase stocks in anticipation of depreciation of the rupee or some other restrictions by the government while exports may be handicapped by political uncertainty and loss of competitiveness of Pakistani products abroad. Unfortunately, the government has taken notice of the deteriorating situation very late. It has recently imposed/increased regulatory duties on a number of items to contain imports and promised to activate the PM's package for the expansion of exports but the impact of tariff rationalisation measures would only be visible from December, 2017 as the new conditions were not applicable to imports where LCs or BLs were issued before the date of issuance of the notification. Anyhow, these minor steps are not going to make much difference so far as narrowing of trade deficit is concerned. Obviously, if efforts were not made to enhance the productivity of economy and ensure competitiveness of Pakistani products in the international market by depreciating the Pak rupee to reverse the present trend in trade deficit, current account deficit could widen further, rupee could come under increased pressure, and foreign exchange reserves held by the SBP could decline. Unfortunately, the government, instead of making the right moves, has made it a habit to borrow from all kinds of sources including through floatation of bonds and other sources to finance the widening gap in the external sector. Such a distorted policy would further increase the outstanding stock of external debt and debt servicing liability of the country in the years to come, limiting the options of the future governments and putting them under a great deal of stress. Speaking objectively, the country cannot continue to afford to spend more than double the amount of foreign exchange on imports than what it earns from exports. Such a trend is neither desirable nor sustainable and could cause a lot of problems for country's economic prospects.
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