ISLAMABAD: Pakistan’s trade balance is deteriorating at an accelerated pace as it increased sharply to $5.11 billion in November 2021 from $1.94 billion in the same month last year 2020, registering a 163% increase.
It shows an alarming trend, as it will increase pressures on the current account deficit (CAD) in the coming months and without ensuring dollar inflows mainly through debt-generating instruments. With the blessing of the IMF, the pressure on the exchange rate could intensify further in the weeks and months to come.
There are three bad news stories simultaneously on the economic front, as these developments have shocked even some federal cabinet ministers. First, the consumer price index (CPI) rose when a federal minister told this scribe in substantive discussions that he expected inflation based on the CPI crosses the 10% mark for November 2021 against 9.2% for October 2021. He had even told the governor of the State Bank of Pakistan that the CPI could exceed the 10% mark, but that it rose to 11 .53% for November 2021.
Second, a senior economic official said that the trade balance was showing a deterioration as a result of the surge in imports, but he had not expected the import bill to hit the $8 billion mark on a monthly in November 2021 against exports of $2.9 billion, so the trade deficit increased by $5.11 billion in just one month.
The overall trade deficit increased sharply and stood at $20.7 billion in the first five months (July-November) of the current fiscal year, with exports reaching $12.37 billion but imports reaching $33.11 billion. The trade deficit stood at $9.54 billion in the same five months of the previous fiscal year. The trade deficit in the five months of fiscal year 2022 increased by 117%.
The trade deficit stood at $3.87 billion in October 2021, with exports standing at $2.7 billion and imports at $6.33 billion.
This dominant trend shows that the trade gap is widening on a month-to-month basis and it may now have raised alarm bells among those in Block Q (Finance Department).
The Prime Minister’s Finance Advisor, Shaukat Tarin, chaired a meeting at the Finance Ministry to discuss the rising import bill and ordered relevant authorities to take measures to reduce the import of luxury items.
Senior Finance Ministry officials shared the import breakdown data, which shows import of food products amounted to $911 million, energy including POL and RLNG products $2.4 billion. dollars, raw materials $2.2 billion, machinery $1.14 billion and Covid-19 vaccine $621 million in November 2021.
There is not much room left for the government to reduce imports, however, the Ministry of Finance is continuously considering options to ban the import of cars and increase regulatory duties (RD) and additional customs duties on 10 to 12 other luxury items. to reduce the import bill. The third piece of bad news is the continued crash of the stock market and the depreciation of the exchange rate as it plunged.