Pakistan's trade deficit in May balloons by 134 per cent

Pakistan's merchandise trade deficit in May has ballooned by 134 per cent from the previous year due to lower export proceeds and higher than expected imports, according to data from the commerce ministry on Wednesday.

According to Dawn, the monthly deficit reached USD 3.432 billion in May 2021 from USD 1.467 billion in 2020, raising fears of creating a problem for the government in controlling external accounts. In rupee terms, the trade deficit was posted at 125.2 per cent on a year-on-year basis.

Since December 2020, the trade gap in Pakistan has been widening, mainly led by exponential growth in imports with comparative slow growth in export proceeds from the country.

Between July 2020 and May 2021, the trade gap widened by 29.5 per cent to USD 27.275 billion in the 11 months of 2020-21 from USD 21.065 billion over the corresponding last year.

While in FY20 the country's trade deficit had narrowed to USD 23.099 billion from USD 31.820 billion, this target was already crossed in 10 months of FY21, indicating serious pressure on the external side due to rising imports.

Last month, duty-free imports posted a growth of 73.78 per cent and dutiable imports grew 94.84 per cent on a year-on-year basis. The increase in dutiable imports is because of an increase in regular imports of smuggled prone items such as tyres, textiles and tea, Dawn reported.

However, rebounding imports are likely to create pressures on the external side. It is believed that the current account deficit in FY21 will remain in the range of USD 4 billion to USD 6 billion by the end of June.

Furthermore, exports in Pakistan have dipped by 25.3 per cent on a month-on-month basis. The month-on-month dip is mainly because of a substantial drop in exports proceeds in May despite a lower base in May 2020 that provided a lower base for higher growth.

The value-added sector has already warned the government about a possible shortage of raw materials in the coming months. The stakeholders warned the government that if the cotton yarn was not made available in the required quantity, export orders in hand would eventually be diverted to rival countries, Dawn reported.

( With inputs from ANI )