Pakistan's trade gap surged to $7.33 billion in July-August 2021

 The exports stand at $4.597 billion while imports at $11.93 billion in the first two months of 2021-22 financial year 

The imports have outpaced the exports in the first two months of current financial year. The imports are increasing at fast pace but exports are almost stagnant. It is really a worrying development for the government.

For three years, PTI government was continue to take credit for bringing down the current account deficit.  The current account deficit was reduced at a high cost of economic growth. The government also claimed  that it has ended the cycle of boom and bust and now economic growth will not bring back the current account deficit. 

But as soon as the growth has picked up some pace , the current account deficit started to rise. The imports are surging. The government tried to control the imports in last three years but in the fourth year, it started to rise sharply.  

The Total exports in the first two months (July and August) stands  at $4.597 billion, while imports at $11.934 billion, leading the total trade deficit to surge to $7.337 billion just in first two months of the current fiscal year.

The exports of the country brought $2.257 billion during August 2021, while imports stood at $6.333 billion in the same month so the trade deficit went up by $4.055 billion just in the first one month.

The exports stood at $2.34 billion in July 2021, while imports were standing at $5.6 billion bringing the trade deficit at $3.261 billion.It indicated the pace of the widening of trade gap increased in the second month (August 2021) posing a serious threat to the external account of the economy.

                                               

The trade deficit has surged 133% in the month of August compare to last year. The trade deficit was $1.74 billion in August 2020 which increased to $4.055 billion in August 2021. if this trend continued for the rest of the year then it means the current account deficit will end up at whopping $12 billion to $14 billion. And in the next financial year which will the last year of PTI government, the deficit might be up to $18 billion.  

The State Bank of Pakistan (SBP) had projected CAD to be around 2% to 3%  of GDP during current financial year 2021-22 , equivalent to $6 billion to $9 billion. However, independent economists like Dr Hafiz Pasha see the CAD going up to $12-13 billion for the current fiscal year.

It will be difficult for the government to achieve the export and remittances target during current financial year 2021-22. If government failed to achieve the export and remittances target then it will be forced to take more loans. The government already added on more than Rs 15,000 billion in the debt in just three years. 

The rupee also continue to lose its value against dollar. Despite having foreign exchange reserves at record high $27 billion, the dollar continue to rise. The State Bank is not intervening to stop this fall. The weaker rupee will make imports even more expensive.  

The PTI government has set target for Pakistan’s exports in the range of $38.7 billion to $40 billion during this fiscal year. The exports of goods and services were recorded at $31.3 billion in the last fiscal year ended June 30, 2021, including $25.3 billion exports of goods and $6 billion of services sector.

                                                            Economic correspondent