Friday Dec 03, 2021
ISLAMABAD: Pakistan’s trade balance is getting worse fast, rising sharply to $5.11 billion in November 2021 against $1.94 billion in November last year. That is a surge of 163%.
This shows an alarming trend because it will add pressure to the current account deficit in the months ahead and without ensuring dollar inflows, mainly through debt-creating instruments.
With the blessings of the IMF, the pressure on the exchange rate might further escalate in the weeks and months ahead, The News reported.
The news report highlighted three negative developments on the economic front which reportedly even shocked some federal cabinet ministers.
The first development related to the Consumer Price Index (CPI) going high. A federal minister told the publication, in background discussions, that he was expecting CPI-based inflation may be crossing the 10% mark for November 2021 against 9.2% for October, 2021. The federal minister said that he had even told the State Bank of Pakistan governor that the CPI might go beyond the 10% mark, but that it went up to 11.53% for November, 2021.
The second development is that, as per a top economic manager, the trade balance is showing a worsening situation in the wake of rising imports but that he had not thought that the import bill would touch the $8 billion mark on a monthly basis in November 2021 against exports of $2.9 billion, so the trade deficit went up by $5.11 billion just in one month.
The overall trade deficit has risen sharply and stood at $20.7 billion in the first five months (July-November) period of the current fiscal year as the exports fetched $12.37 billion, but imports went up to $33.11 billion. The trade deficit stood at $9.54 billion in the same five months of the last fiscal year. The trade deficit in five months of FY2022 went up by 117%.
The trade deficit stood at $3.87 billion in October, 2021 as exports stood at $2.7 billion and imports $6.33 billion.
This prevailing trend shows that the trade gap is widening on a monthly basis and it now might have rung alarm bells among the dwellers of Q Block (Ministry of Finance).
Shaukat Tarin, the PM's adviser on finance, chaired a meeting in the Ministry of Finance to review the increasing import bill and directed the authorities concerned to take steps to curtail the import of luxury items.
Top officials of the Ministry of Finance shared the break-up data of imports, which shows that the import of food items stood at $911 million, energy, including POL products and RLNG $2.4 billion, raw material $2.2 billion, machinery $1.14 billion and COVID-19 vaccine $621 million in November 2021.
There is not much space left with the government to curtail imports, however, the Ministry of Finance is continuously contemplating upon options to slap a ban on the import of cars and jack up the Regulatory Duty (RDs) and Additional Customs Duty on 10 to 12 other luxury items in order to reduce the import bill.
The third negative development is the continuous haemorrhaging of the stock market and depreciating exchange rate as it nosedived.