Trade deficit widens to $10.92bn in 9 months of FY10

ISLAMABAD: The countryís trade deficit has registered a decline of $10.92 billion during the first nine months of 2009/10 (July-June) as compared to $12.74 billion during the corresponding period last year, depicting a decline of 14.29 per cent, Federal Bureau of Statistics said on Monday.

Interestingly, during July-March 2009/10, exports went up by 6.0 per cent to $14.18 billion and imports registered a decline of 3.9 per cent to reach $25.11 billion, as compared to exports of $13.38 billion and imports of $26.12 billion during the corresponding period last year.

Economic managers attributed rupee depreciation as the key factor behind the decline in imports and the slight increase in exports. An almost 3.3 per cent depreciation of the rupee against the dollar has made the local products less costly, attracting foreign buyers, but at the same time has hit imports, which become costlier in the Pakistani market.

During March, the trade deficit widened by 41.89 per cent to $1.479 billion against $1.042 billion recorded during the same period last year. During the month under review, country exported products worth $1.807 billion, showing a rise of 37.78 per cent and imported products worth $3.287 billion, depicting a rise of 39.6 per cent, according to the data.

Increase in the international oil prices can further put pressure on the countryís trade deficit situation, experts said.Exports registered an increase of 17.37 per cent and imports 31.24 per cent during March as compared to February, when exports stood at $1.54 billion and imports at $2.5 billion.

On the one hand, depreciation in the rupee value has supported bridge trade gap, but on the other, it is also instrumental for mounting pressures on the countryís external debt, ie, each dollar debt needs more rupees to retire or service it.

The countryís external debt and liabilities at the end of December 2009 stood at unprecedented $55.67 billion, which is 33 per cent or around one-third of the countryís GDP. In absolute terms, keeping in view the impact of rupee depreciation on the total debt burden, increase in dollar value will burden the economy by more than Rs55 billion.

The economic policymakers should think about the negative and positive fallouts of the currency depreciation on the national economy, the experts said. They called for coordinated efforts of the federal government and the central bank to bridge gap between mounting debt burden and reduced trade deficit.

Haris Zamir adds: As per the revised target of the State Bank of Pakistan, exports will fall short of target and the trade deficit for the full-year would be in excess of the projections of $11.8 billion, an expert said.

The central bank is expecting the trade deficit to hover around $11.8 billion, imports to range between $30.5 billion and $31 billion and exports to be around $18.7 billion to $19.2 billion.“On an average, $1.7 billion per month will be required to meet the export target, which although is not a Herculean task, but can be hard to achieve due to rise in raw material prices, power outages, higher commodity prices, including cotton, oil and increase in refinance rate,” an exporter said.

Source: http://www.thenews.com.pk/daily_detail.asp?id=233943