PAKISTAN’S trade deficit shrank 36% to $3.9 billion in
first two months of the current fiscal year on the back of a one-fifth reduction in imports but exports marginally grew by 2.8% despite a steep currency depreciation that brought a heavy cost to the economy. Trade figures released by Pakistan Bureau of Statistics (PBS) showed that exports contracted both on a month-to-month and year-to-year basis in August despite over one-third devaluation of the rupee against the US dollar. Cumulatively, exports grew 2.8% or just $102 million to $3.75 billion in the July-August period of current fiscal year, which suggested a serious review of the monetary policy.
The data is indicative of trend that the policies being pursued by present economic managers have started paying dividends. Widening trade deficit was a source of concern for not just policy makers but entire nation as the country was finding it extremely difficult to manage its affairs and had to seek more and more foreign assistance, loans to meet its growing needs. No doubt, government has managed external finances but these are not without conditions and ramifications for economy and people of Pakistan. Reduction in imports is not generally considered a good thing if it means curbs on import of plants and machinery yet trade data indicates the improvement was mainly because of reduction in imports of petroleum group, transport group, textile and food groups. But drop in imports also affects government tax collection efforts and therefore real challenge is increasing exports.
It is also alarming that exports are not picking up despite repeated and unabated devaluation of rupee. How exports can increase when government has withdrawn almost all subsidies, concessions and has instead imposed additional duties and taxes on the industry? The situation can improve if duties are increased on import of luxury and unnecessary items and concessions are offered to export sector besides taking tangible measures to ensure ease of doing business.
