Trade deficit widened by 15.1% in July-March

By Sajid Chaudhry

ISLAMABAD: The country’s trade deficit widened to $9.985 billion in the first nine months (July-March) of current fiscal year 2006-07, showing an increase of 15.1% over the same period of last fiscal year.

According to official trade data released on Tuesday, total exports of the country amounted to $12.435 billion in July-March period of current fiscal year, as compared with the exports of $12.014 billion in the same period in fiscal year 2005-06, showing an increase of just 3.5%.

The country’s imports in July-March period of this fiscal year stood at $22.42 billion against the imports of $20.688 billion in the same period of last fiscal year, indicating an increase of 8.9%.

The country’s trade deficit has widened to $9.985 billion in the first nine months (July-March) of current fiscal year 2006-07 against the deficit of $8.674 billion in the same period of last fiscal year, showing an increase of 15.1%.

Exports of the country in March 2007 were 1.533 billion, as compared with the exports of $1.513 billion in March 2006, indicating an increase of just 1.3%.

Imports of the country in March 2007 were $2.623 billion against the imports worth $2.682 billion in March 2006, showing a decrease of 2.2%.

The country’s trade deficit declined by 6.8% in March 2007, with a deficit of $1.090 billion as compared with the trade deficit of $1.169 billion in March 2006.

Exports of the country increased by 18.3% in March 2007 with total exports of $1.533 billion as compared with the exports of $1.296 billion in February 2007.

Imports showed a declining trend in March 2007 with total imports of $2.623 billion, as compared with imports made in February 2007 of $2.572 billion, showing a marginal increase of 2%.

The country’s trade deficit declined by 14.6% in March 2007 with a total deficit of $1.090 billion as compared with the deficit of $1.276 billion in February 2007.

Total exports of the country were 66.6% during July-March period of the export target of $18.6 billion fixed for the current fiscal year. However, imports have surged to 80.1% of the target of $28 billion fixed for the current fiscal year.

Asian Development Bank’s Asian development Outlook (ADO) 2007 released recently has highlighted some of the important issues impeding the country’s exports. The ADO 2007 has pointed out that in the past five years, merchandise exports have delivered over 12% average annual growth, as they have benefited from an enabling policy environment, low inflation, the low cost of credit and a general upturn in economic activity. In FY2005 and FY2006, they grew by 16.6% and 15.4%, respectively, but started decelerating in the second half of FY2006, to just over 6.5%, and to 5.0% in the first half of FY2007. Some of the decelerations stem from the high base effect, but the underlying causes appear structural.

The main issue is exports’ heavy reliance on textiles as well as limited geographic diversification. Between them, textiles and clothing, cotton, leather, rice, and sports goods account for over three quarters of the total exports — textiles and clothing alone for three-fifths. Thus a downturn in these segments has a significant overall impact.

Conversely, immediately after the ending of quotas, textile exports accelerated strongly, to 16.8% in FY2006 from 6.6% the year before. Increasingly, however, textile exports have come under competitive pressure from Bangladesh, the People’s Republic of China, and India, specifically in the higher value-added categories that have, traditionally, not been strength of the Pakistani textile sector.

This pressure, in turn, has led to a fall in international export prices. Consequently, Pakistani textile exports increased by only 4.3% by value in the first half of FY2007. The low expected cotton production in 2007 would further hit textile exports, as would the removal of restrictions on textile exports from the People’s Republic of China in 2008.

Another issue is that the bulk of Pakistan’s trade is with a handful of countries, particularly in Europe and North America. It is expected that the growth in trading volumes in those regions will decline in 2007, hitting Pakistan’s exports there. Thus, the lack of export diversification—for products and markets—is the main reason for the recent sluggish performance. Trade policy should therefore focus on developing strategies for diversification and enhancing export competitiveness.

http://www.dailytimes.com.pk/default.asp?p...11-4-2007_pg5_1

We need to diversify our exports!! Heavy reliance on textiles and agricultural exports is not a good thing.