Pakistan recorded a massive $3 billion trade deficit in July, the first month of the financial year 2021-22, dashing the rosy picture being presented by officials citing the increase in exports
Pakistan recorded a massive $3 billion trade deficit in July, the first month of the financial year 2021-22, dashing the rosy picture being presented by officials citing the increase in exports. The increase in imports was almost double in comparison to that of exports.
Despite the increase in exports, the country’s economy is being dragged by the exponential rise in imports in the last few months. In the last fiscal (FY 21, which ended in June), the trade deficit widened by 32.9 percent, posting around $30 billion difference between imports and exports.
For three consecutive years, from FY18 to FY 20, the trade deficit was on the decline. It touched an all-time high of $37.7 billion in FY18, $31.8 billion in FY19, and $23.183bn in FY20. However since December last year, the import grew significantly while the growth in exports couldn’t match that. And in FY21, it recorded $30.796 billion.
The import bill surged to $56.091 billion in FY21 from $44.574 billion the previous year, recording a 25.8 percent growth.
Officials claim the rise in imports is mainly due to raw material imports, which will pay off later. However, the widening gap in the last seven months doesn’t collaborate the claim. In July this month, the import bill is also rising mainly due to increased imports of petroleum, soybean, machinery, raw material and chemicals, mobile phones, fertilizers, tyres and antibiotics, and vaccines.
Significantly, remittances, too, have recorded a significant growth, which will let the country finance its import bill. On the expected lines, Shabaz Gill, Pakistan’s prime minister special assistance said that exports had touched the highest-ever mark of over $25 billion in FY21.
Furthermore, there is a sword hanging on the country’s GSP plus status in the EU market, which provides almost tariff-free access to most of Pakistan’s export to the EU market. In April, the EU parliament passed a resolution, calling for suspending the GSP plus status for Pakistan, citing the blatant misuse of the country’s blasphemous laws.
Pakistan’s textile sector has been most benefited from it. The loss of the status could cause a direct loss of $4 billion in exports and may also herald the collapse of the industry which creates thousands of jobs. The sector accounts for a quarter of the country’s total exports.