There is still life in imports. There is little of it in exports. The monthly trade data summary for April 2018 by the PBS shows continuation of the trend, with another month of over $5 billion imports. The exports in April 2018 also stood north of $2 billion, yet 4 percent down month-on-month. The cumulative trade deficit for 10MFY18 stands at $30.5 billion – with imports of $49.79 billion and exports of $19.2 billion.

Such has been the deterioration in trade deficit; that it was 36 months ago when monthly exports were higher than trade deficit. Both the 10MFY18 imports and exports have grown at 14 percent year-on-year, whereas the trade deficit has gone up by 15 percent year-on-year.

Not all imports are bad, and for an economy trying to sustain growth, imports are imperative. And yes, the rise in imports has a significant lot to do with the advent of CPEC-related projects. But a long hard look at the quality of imports would not harm. The rise in machinery and petroleum imports is understandable to a great extent, for CPEC progress and a visible increase in international oil prices.

Worryingly, the non-machinery non-petroleum imports too, have not shown any signs of slowing down – having grown by 15 percent year-on-year by 9MFY18. Machinery imports have also slowed down from FY17 – showing a decline of 4 percent year-on-year in 9MFY18. Petroleum imports, on the other hand, have shown a massive increase of 32 percent year-on-year in the same period. Machinery imports had crossed petroleum imports in FY17, but petroleum imports have now taken the position back, mostly owing to more megawatts in the system requiring more fuel and higher fuel price. Petroleum imports now constitute one-fourth of imports, up from one-fifth in FY17.

Such high level of trade deficit is not sustainable and would require additional financing. The deteriorating reserve position is reflective of the issue in hand. BR Research had forecasted FY18 imports at $59 billion based on 4MFY18 numbers back in November 2017. (Read: ‘scary rise in imports’ published Nov 15, 2017). If anything, that forecast may end up being slightly on the lower side. There are no signs of imports cooling down anytime soon. Exports will have to be jacked up considerably, before the deficit becomes a headache, if it is not already.