Pakistan's trade deficit shrinks $2.64 billion in July 2022

 The Import bill declined by 38 per cent to $4.86 billion in July 2022 as compared with $7.88 billion in June 2022l 

According to the data released by Pakistan Bureau of Statistics (PBS), Pakistan’s trade deficit has narrowed by 18 per cent in the month of July 2022. The trade deficit has sharply narrowed by 46.76 per cent to $2.64 billion in July 2022 when compared with $4.96 billion in June 2022. It is the lowest trade deficit in last 18 months.

The measures taken by the government to curb the import contributed largely to this decline. The government has introduced many measures to reduce the ballooning trade deficit. The government is trying to reduce the Current Account Deficit (CAD) from more than $17.5 billion in 2021-22 to $10 to $12 billion in 2022-23.  

The contraction in trade deficit may be attributed to decline in import bill. The import bill of the country fell by 13 per cent to $4.86 billion in July 2022 as compared with $5.57 billion in the same month of the last year. The import billion declined by 38 per cent to $4.86 billion in July 2022 as compared with $7.88 billion in June 2022.

The high prices of oil have decreased the demand of oil. The lower oil consumption means that Pakistan will import less oil in August and September.

The steep reduction in imports in July compared to the preceding month should be a sigh of relief for the policymakers, who have been struggling on the one hand to calm down markets and on the other hand dealing with the International Monetary Fund (IMF), which is increasingly getting tough on Pakistan.

The federal government’s import ban has largely proved ineffective but the SBP’s vetting of almost every letter of credit, introduction of import quotas and even restricting imports through open accounts have helped to slash the import bill.

For current fiscal year 2022-23, the government has set the trade deficit target at $27.8 billion, which requires a reduction of 42% against last year’s deficit. The import target for the new fiscal year is $65.6 billion that will require 22% reduction in the import bill. 

Pakistan’s trade deficit had increased at an unsustainable pace of over 55% and skyrocketed to a record $48.3 billion in the last fiscal year due to an unmanageable increase in imports that beat all official estimates despite a temporary ban on certain goods.

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