Pakistan's trade deficit is likely to swell in the current fiscal year following a considerable increase in imports in the wake of floods in Sindh and Balochistan that damaged cotton, sugar, vegetables and other cash crops. A widening trade deficit would, in turn, have an adverse impact on current account balance and foreign exchange reserves.
Sources in the Agriculture Ministry said that the country might be compelled to import around 1.5 million to 2 million bales of cotton, which would have been available domestically if floods had not destroyed the crop. In addition, 0.4 m million to 0.5 million tons of sugar, besides other essential commodities including perishable food items, would need to be imported to plug the demand-supply gap.
Cotton production was originally estimated at 15 million bales in 2011-12, but the recent flood in Sindh and rains in Punjab have adversely affected the major Kharif crop, destroying 2.5 million bales cotton in Sindh. What is more disturbing is that cotton bales arriving in the domestic market from Punjab have also been damaged by the rains and almost 1.5 million bales of cotton have been found of substandard quality.
The spinning sector of Pakistan would require 15-16 million bales for the textile sector and shortfall of 2.5 million bales on account of floods would now be met through import. The import of 1.5-2 million cotton bales for the fiscal year 2011-12 would increase import bill by about Rs 40 billion. Sources said that the import of 0.4-0.5 million tons of sugar would definitely be one of the main factors behind increase in the import bill.
"A few days back, a meeting was held in the Ministry of Finance. The provincial and federal representatives also attended the meeting. It was assessed that the country may face a shortage of sugar after January 2012. So, as a precautionary measure, 4-5 lakh tons of sugar would have to be imported on urgent basis", sources added.
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