Trade data is again disappointing. According to the July-November 2017 data released by the Pakistan Bureau of Statistics (PBS) on 11th December, trade deficit of the country has swelled nearly by 29 percent to dollar 15.03 billion in the first five months of the current fiscal year. On year-on-year basis, trade deficit surged by 19.44 percent to dollar 2.924 billion in November, 2017 from dollar 2.448 billion in November, 2016. Pakistan's exports increased by 10.49 percent while imports surged by 21.12 percent during July-November, 2017 as compared to the corresponding period of last year. Exports rose to dollar 9.030 billion from dollar 8.173 billion and imports to dollar 24.060 billion from dollar 19.864 billion during July-November, 2016. Imports increased by 16.48 percent during November, 2017 over the same month of last year while exports posted a growth of 12.35 percent. Compared to the previous month, trade balance improved by 3.85 percent in November, 2017 as a result of a 4.56 percent growth in exports and a 0.63 percent contraction in imports. Exports have increased to dollar 1.974 billion in November, 2017 from dollar 1.888 billion in October, 2017 while imports decreased to dollar 4.898 billion from dollar 4.929 billion in the same period.
The latest developments on the front of trade account are almost frightening and speak volumes about the emerging problems in the external sector account of the country. It may be recalled that trade deficit of the country which was less than dollar 20 billion in FY14 had surged to dollar 32.58 billion during 2016-17. The trend during the current year suggests that this deficit could be as high as nearly dollar 37 billion which would be about dollar 5.0 billion more than last year. Although home remittances and DFI are also increasing, the rate of rise is not as robust as to cover the aggregate trade deficit with the result that current account deficit of the country could be substantially higher than last year's. The recent accrual of dollar 2.5 billion from Sukuk and Eurobonds will obviously not be sufficient to cover such a high level of deficit and the government of Pakistan may be forced to borrow more from the international market and foreign banks.
There could be a number of reasons for the disappointing performance of the trade account. Importers may be anxious to build inventories and increase stocks in anticipation of devaluation of the rupee or some other measures by the government to restrict imports while exporters may be handicapped by loss of competitiveness of Pakistani products abroad, political uncertainty, etc. Fortunately, however, the government, of late, has become more conscious about the issue of widening trade deficit and taken several measures. For instance, Prime Minister's export package has been launched, a regulatory duty has been imposed on non-essential items of imports and disbursement of refund claims has been expedited. With these measures in place, exports have grown, imports have contracted somewhat and trade deficit during November, 2017, has shrunk by a moderate amount. The visiting IMF mission also seems to have convinced the Pakistani authorities to depreciate the Pak rupee. The protracted absence of Ishaq Dar from the scene would facilitate the introduction of this measure. Obviously, the country cannot afford to spend more than double the amount of foreign exchange on imports than what it earns from exports. It is quite clear that current account deficit of the country would widen further, and foreign exchange reserves held by the State Bank could dwindle to very low levels in the absence of a slew of corrective steps, forcing the country to negotiate a harsh conditionalities-laden programme with the IMF anytime soon.
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