Trade deficit has remained a persistent problem of the consumption-driven economy of Pakistan. According to Arif Habib Limited, trade deficit of the country stood at $2.88 billion for the month of September, 2022, showing a decline of 31 percent in comparison to the same month in preceding year. On a month-on-month basis, the trade deficit fell by 20 percent in September as compared to August 2022.
Trade Numbers: Sep’22
Exports: $ 2.39bn, -1% YoY | -4% MoM
Imports: $ 5.27bn, -20% YoY | -13% MoM
Trade deficit: $ 2.88bn, -31% YoY | -20% MoM@PBSofficialpak @StateBank_Pak @GovtofPakistan @FinMinistryPak#PBS #Exports #Imports #TradeBalance #Economy pic.twitter.com/8CtU7M6LEV
— Arif Habib Limited (@ArifHabibLtd) October 4, 2022
The country was experiencing high levels of inflation due to the surge in food prices. The increase in prices was the consequence of supply shortage as the crops got destroyed due to massive flooding. The government started to import in order to mitigate the impact of the agricultural devastations caused by the flash floods. The pace of food inflation surged to 30.8 percent in cities and to 32.7 percent in villages and towns last month.
Looking at the breakdown, imports fell by 20 percent on a year-on-year basis standing at $5.27 billion in September 2021. On a month-on-month basis, imports decreased by 20 percent as compared to $6.07 billion in August 20222.
Alarming is the decline in exports by 1% on year-on-year basis, standing at $2.39 billion in September 2022. On a month-on-month basis, exports fell by 4 percent as compared to $2.48 billion in August 2022.
Export sector of Pakistan
Pakistan’s export performance has remained weak over the past two decades. Despite significant potential, Pakistan remains underrepresented in global supply chains, with the exception of rare bright spots such as textiles.
Energy shortages, the security situation and political instability remain key structural impediments to higher investment, both domestic and foreign, in export sectors such as manufacturing.
The degree of global demand, and export promotion through structural reforms, role of other contemporary factors lose significance in inducing higher demand for exports. While addressing the global cyclical factors is beyond the capacity of a small open economy like Pakistan, it is the structural reforms that need the immediate attention.