Pakistan’s Trade Deficit Widens: Latest Import/Export Statistics Revealed

The Pakistan Bureau of Statistics (PBS) released its latest data on Monday, revealing a notable increase in the trade deficit for March, highlighting ongoing challenges in the country’s trade dynamics. According to the report, the gap between exports and imports widened by 56.3% to reach $2.2 billion compared to the same period last year. This translates to an absolute increase of $782 million in the trade deficit, a figure surpassing the last loan tranche received amounting to $706 million.

In March, exports stood at $2.56 billion, marking a modest increase of $189 million or 8% compared to the corresponding month of the previous year. However, the more pronounced surge was observed in imports, which rose sharply to $4.7 billion, representing an increase of $971 million or 26%.

The increase in the trade deficit underscores the ongoing challenge of managing imports, as Pakistan grapples with limited foreign exchange reserves. To address this issue, banks have been restricted to opening letters of credit (LCs) for imports based solely on available liquidity, reflecting efforts to curtail the outflow of foreign currency.

Moreover, the country’s central bank has been actively utilizing a significant portion of exports and remittances to bolster its foreign currency reserves, which, despite assistance from the International Monetary Fund (IMF), remain at a relatively thin level of $8 billion.

Despite various incentives such as subsidies, minimal income tax, and preferential access to certain markets like Europe, Pakistani exporters have struggled to significantly increase their shipments abroad. Prime Minister Shehbaz Sharif recently announced special perks for leading exporters and taxpayers, recognizing the importance of supporting export-oriented industries. Notably, Style Textile emerged as Pakistan’s largest exporter with $522 million in exports. However, the absence of exporters surpassing the $1 billion mark annually highlights the ongoing challenges within the export sector, even amidst protective measures.

The month-on-month comparison reveals a further widening of the trade deficit, with exports marginally dipping below $2.6 billion last month compared to February, while imports surged by over 9% to $4.7 billion. This trend underscores the need for sustained efforts to rebalance trade dynamics and promote export growth.

The finance ministry had expressed optimism just days ago, anticipating an improvement in exports of goods and services to around $3.5 billion, driven by favorable demand from major export destinations. Simultaneously, imports of goods and services were projected to reach $5.5 billion in March, with the aim of maintaining a sustainable current account balance for the month.

However, the disappointing trade statistics for March resulted in some of the gains achieved through previous months’ reductions in imports being eroded. During the July-March period of the current fiscal year, the trade deficit stood at $17 billion, reflecting a reduction of $5.7 billion or 25% compared to the same period last year. The reduction in the trade gap had exceeded 30% until February, indicating progress in addressing trade imbalances.

Imports during the first nine months of the current fiscal year totaled nearly $40 billion, marking a decrease of $3.8 billion or 8.9% according to national data. In contrast, exports during the same period amounted to $22.9 billion, representing an increase of $1.9 billion or nearly 9%, suggesting some positive momentum in export performance.

In the first eight months of FY24, the current account deficit narrowed to $1 billion, reflecting ongoing efforts to improve the country’s external balance. The finance ministry has shared revised projections with the IMF, anticipating a further reduction in the current account deficit driven by a significant decrease in imports and relatively higher exports of certain commodities.

Contrary to the budgeted current account deficit of $6.1 billion, federal authorities suggested to the IMF that it may fall below $2.5 billion for the ongoing fiscal year. Additionally, the finance ministry expects a further contraction in the trade deficit, aiming to keep it below $22 billion for the entire fiscal year. Revised import estimates are slightly above $52 billion compared to the budgetary target of $58 billion, while export forecasts remain at $30.5 billion, highlighting the importance of continued efforts to promote export-led growth and ensure macroeconomic stability.