Trade deficit reached at $25.47 billion in first 06 months of current financial year

 Trade deficit continues to rise as imports reached at $40.58 billion- An increase of 65.94% from July-December 2020  

According to the data released by Pakistan Bureau of Statistics, Pakistan’s trade deficit of July-December has reached at $25.47 billion. The trade deficit has risen whopping 106.4% year-on-year compare to 2020. The trade deficit which was driven largely by a nearly triple increase in imports compared to exports.

Exports posted year-on-year growth of 24.71pc to $15.102bn in July-December 2021. In December 2021, exports saw a growth of 15.8pc to $2.740bn from $2.366bn in the same month last year. On a month-on-month basis, exports declined by 5.55pc in December. Export proceeds went up by 18.2pc to $25.294bn in FY21 from $21.394bn over the last year.

Upward reversing trend in trade deficit was witnessed for the six consecutive month owing to an unprecedented increase in the import values while the exports stagnated at between $2.5bn and $2.8bn a month — mostly semi-finished products or raw materials.

The merchandise trade deficit has swelled by 85.38pc year-on-year to $4.857bn in December. The highest-ever increase in imports also helped the Federal Board of Revenue collect maximum revenue at the import stage — sales tax, withholding tax and customs duty. However, the government’s battle against the bloated trade deficit is reversing and may cause pressure on the external side because of record imports.

The trade deficit had reached an all-time high of $37.7 billion in FY18. However, PTI government’s measures led to a drop in it to $31.8bn in FY19 and $23.183bn in FY20. The trend reversed and the trade deficit stood at $30.796bn in FY21. The trade deficit is expected to reach an all-time high by the end of June 2022.

One of the major initiatives of the government to encourage imports of raw materials also pushed up the import bill. Oil prices have also increased substantially, which pushed up the import bill because of the high demand for energy in the domestic market. A surge was noted in imports of vehicles, machinery as well as vaccines, pushing the import bill.

According to the Pakistan Bureau of Statics (PBS), Imports during the first half increased two-thirds to nearly $40.6 billion - the imports grew $16.1 billion.

Imports remained out of control as they came in at $7.6 billion in December 2021. They were higher by 52% or $2.6 billion over a year ago, according to the PBS.

It was the second highest import figure that kept the monthly trade deficit close to the dangerous level of $5 billion.

On a month-on-month basis, exports decreased 5.6% to $2.7 billion in December 2021 over November.

Imports dropped 3.8% (or $302 million) month-on-month to $7.6 billion. As a result, the trade deficit amounted to $4.9 billion, down only $141 million.

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