Finance Minister for Pakistan Shaukat Tarin on Monday directed the Ministry of Commerce (MoC) to conduct deep analysis and build scenarios for analyzing and forecasting exports and imports in a better way in the future.
This came following the discrepancy between the MoC’s projection for imports during the month of August and the original data. The projection was way off the mark as the imports exceeded the forecast of $5.5 billion by 18 per cent or $1 billion to reach $6.5 billion.
It is worth mentioning that the month of August saw the highest-ever imports recorded in a single month for Pakistan.
The imports for the first two months of the current fiscal year 2022 have been on the rise, recording a 72.59 per cent increase year-on-year in August 2021, reaching the highest ever a number of $12.06 billion in July-August 2021 up from $6.99 billion in the same months last year.
This has resulted in the ballooning of the trade deficit of 119.94 per cent to $7.491 billion against $3.406bn over the last year, as the increase in imports doubled the increase in exports.
This is concerning for the incumbent government who has been focusing on keeping the current account deficit in check and had been focusing on dampening the impact of high imports by increased remittances.
National media reported that Secretary of Commerce Sualeh Faruqui informed the meeting that the trade balance situation for the last two months is due to the expansion in economic activity, import of one-time goods like COVID-19 vaccine, and increased demand for the raw materials in the local market.
According to the ministry data, the government’s incentives for the industry led to the increase in the exports of value-added products, dawn reported,
Tarin concurred that the growth has led to a 4 per cent expansion in the Pakistani economy leading to an increase in import demand and added that if the trade deficit is within the sustainable level, the economy will move towards recovery.
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Secretaries of the ministry of commerce, information technology, finance division, executive Director General Board of Investment, and other senior officers also participated in the meeting.
Agreeing with this view by the government, research director at Arif Habib Limited Tahir Abbas while talking to Arab news said, “As the economy is picking up pace, the trade deficit is widening, which needs to be reviewed critically and focus should remain on increasing exports of goods and services and curtailing luxury imports.”
He added, “Trade deficit surged mainly on account of higher commodity prices, increase in oil bill, machinery imports under Temporary Economic Refinance Facility (TERF), and vaccine imports.”
The exporters are reportedly hoping for a surge in exports in September as more working days are expected compared to the two preceding months.
It is worth mentioning here that the increased trade deficit combined with the potential downgrading of the Pakistan Stock Exchange from the Morgan Stanley Capital International (MSCI) Emerging Markets (EM) Index to Frontier Market (FM) Index has kept investors in the market wary according to the recent report by Topline Securities.
Experts say that the reason for potential reclassification is the steady decline in market cap of Pakistan constituents since 2017 leading towards ineligibility on meeting the criteria in the market classification framework for Emerging Market.
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Pakistan had been upgraded to the MSCI EM Index in May 2017 after a gap of nine years. Previously, the MSCI placed Pakistan in the Frontier Market Index in 2009.