According to the Pakistan Bureau of Statistics (PBS), the country’s trade deficit widened by 32 percent in December 2020. The primary factor for the increase in the trade deficit in December 2020 is higher imports. A few days back, PBS’ data showed that Pakistan’s exports increased for the fourth consecutive month. However, the recent report punctures the celebrations since the country has seen an equal rise in imports too.
The government must keep a close eye on the increasing deficit in trade. PBS’ statistics came at a time when the government was feeling positive about its exports increase. The government was clearly satisfied while comparing its exports share with neighbouring countries that have experienced negative growth during COVID-19’s second wave. However, any self-appreciation in our case will, perhaps, be based on naivety.
Our neighbours will soon recover from economic stagnation. While Bangladesh exports roughly 40 percent more than Pakistan every month, India’s one-month exports equal our annual outflow of commodities. This is the kind of gap our policymakers need to focus on.
The real challenge for us is to sustain the increase in exporting value-added and non-traditional goods while reducing import bills. The future looks a little grimmer however, as oil prices are bouncing back and it will be hard for Pakistan to keep the cost of production at this low value. Our economic and financial managers appear to be doing nothing to ward off the issues we might face shortly.
Reducing import bills is not that difficult, even without the easiest option to levy high taxes. One easy way is to incentivise the local producers and growers to grow more raw material for our export. Similarly, for exports, concerned authorities must not stop from developing new markets for Pakistani products. The government must exploit the GSP+ status that the European Union (EU) has granted Pakistan and pacts like the China-Pakistan Free Trade Agreement and the South Asia Free Trade Area (SAFTA) Agreement. All these steps together can bring down our imports bill while simultaneously shoring up our exporting capability.