The second month of current fiscal year 2022 saw the widening of the trade deficit by 133 per cent, data released for the month of August 2021 showed.
The provisional data showed that the imports increased two times more than the increase in exports as the economy reopens. The trade deficit for August 2021 reached $4.05 billion compared to August 2020 when it was $1.740 billion.
The exports for August 2021 reached $2.26 billion compared to $1.58 billion in August last year, showing an increase in exports 42.5 per cent year-on-year. On the other hand, on a month-on-month basis, the exports went down 3.5 per cent from $2.34 billion in July 2021.
On the other hand, imports saw an 89.9 per cent increase year-on-year, reaching highest ever number of $6.31 billion in August 2021 up from $3.32 billion in the same month last year. On the month-on-month basis, the imports increased 12.7 per cent from $5.6 billion in July 2021.
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This difference in exports and imports translated into a 133.1 per cent growth in trade deficit year-on-year, and 24.4 per cent increase month-on-month.
According to the estimates by economists, this might push the current account to $10 billion for the ongoing fiscal year 2022.
A Pakistani economist Muzammil Aslam took to Twitter to say, “Imports once again hit $6.3bn in August, the import speed is twice as exports. Definitely, checks needed.”
He added, “Other thing worrying me skyrocketing global commodity prices & logistics.”
Imports once again hit $6.3bn in August, the import speed is twice as exports. Definitely, checks needed. Other thing worrying me sky rocketing global commodity prices & logistics. pic.twitter.com/SuY7RkEsp5
— Muzzammil Aslam (@MuzzammilAslam3) September 2, 2021
Managing Director Kasb Securities A A H Soomro also commented on the update saying that the government needs to impose Export Emergency, impose tariffs on luxury imports and adjust discount rate.
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He talked about the impact of currency devaluation the economy saying, “10% PkR depreciation in 3.5 months only deters investor & business confidence as the financial planning gets adversely impacted.”
10% PkR depreciation in 3.5 months only deters investor & business confidence as the financial planning gets adversely impacted.
Especially in the wake of rising commodity prices & supply shortages. Yes PkR has only shed 8% in 2 years (data cherry picking), it's action time.
— A A H Soomro (@AAHSoomro) September 2, 2021
Other experts commented that this will definitely lead to the Current Account Deficit ballooning beyond government’s 2-3 per cent range.
Adviser to Prime Minister of Pakistan for Commerce and Investment Abdul Razzak Dawood also commented on this update saying, “growth (in exports) was affected by shipments’ delays due to heavy rains.”
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Mr. Dawood added that the exports for August 2021 are short by $143 of our monthly target of $2.4 billion. He also urged the exporters to double their efforts to market their exports in order to achieve our target.
I am glad to share that our exports for the month of August 2021 have grown by 43% to USD 2.257 billion as compared to USD 1.584 billion in August 2020 (growth was affected by shipments’ delays due to heavy rains). The exports for August 2021 are short by USD 143 million of our
— Abdul Razak Dawood (@razak_dawood) September 1, 2021
Note: The figures are provisional and the relevant ministry is still analyzing the data