There was some objectively good news on the trade front in October as Pakistan broke its record for the month. Exports grew 17.5% compared to the same month last year, rising to $2.47 billion, according to the Ministry of Commerce. However, some may question why Commerce Adviser Abdul Razak Dawood is “pleased” by the numbers that were still well short of the $2.6 billion target. Indeed, breaking a record while failing to reach the target still suggests a significant overestimation. And it is not just for October. Despite strong growth in exports — 25% for the year to date — the $7.58 billion figure is still well short of the $9.6 billion target for the first four months of the fiscal year.
Meanwhile, skyrocketing imports have cancelled out any possible current account benefits from the rising exports. The trade deficit has more than doubled to over $15 billion in the year to date, as imports rose 64% from July to October, totaling $25 billion for the year to date, compared with $15.19 billion for the first four months of last year. The ministry’s claims to defend the widening trade gap also had some holes. The government says about 40% of the total was “investment-driven” and indicated industrial growth. The rest, it said, was imports with inelastic demand, such as food items and oil and gas.
This may be true, but it also reflects the policy failings in several areas. While oil and gas make up the bulk — 34% — of the $9.8 billion increase in imports and are largely uncontrollable, food accounts for over 8% of the increase. At the same time, consumer goods and other non-industrial items also saw significant increases. Most of these could have been controlled or even reduced with better policies. There is also the argument that passing the increasing global oil price onto consumers may have helped discourage consumption and reduce imports to some extent. Many more ‘what ifs’ also come to mind, but the priority must be on ‘what now’? Despite reasonable current account reserves, the widening trade gap could soon cause an economic crisis.
Published in The Express Tribune, November 3rd, 2021.