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Trade Deficit Increases for Two Consecutive Months

Pakistan’s trade deficit widened by 21.03 percent to $2.601 billion in January 2021 from $2.149 billion compared with the same month last year, according to the data released by the Pakistan Bureau of Statistics.

This sharp worsening is mainly due to surging duty-free imports. This is the second consecutive month when the trade deficit has swelled, which hints at recovering the consumption economy.

An increase in export also means a recovering global economy and improvement in domestic production.


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During the first seven months of the fiscal year 2021 (FY210), i.e., July 2020 to January 2021, the trade deficit increased by 8.27 percent to $14.96 billion from $13.82 billion in the corresponding period last year.

In December 2020, Pakistan’s trade deficit had widened by 32.04 percent to $2.683 billion as compared to $2.032 billion in December 2019.

The country’s imports have been rising since September 2020. The duty-free import value was recorded an unprecedented growth of 80 percent in December while it grew by 30 percent in January.

In the July-January period of 2020-21, the duty-free imports witnessed an increase of 27 percent in terms of dollars compared to the previous year, while the share of duty-free imports also surged 42 percent in overall imports in the seven months in concern. This is up from 35 percent over the same period last year.

As a result of this increase in January, the import bill also went up by 14.85 percent year-on-year to $4.73 billion against $4.121 billion over the corresponding month last year.

Last year, the cost of imports had witnessed a steep decline of $10.29 billion, or 18.78 percent, to $44.509 billion, compared to $54.799 billion in the year before.


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The continuous decline in imports in the last two years had provided some breathing space to the government in managing external accounts despite decreasing exports. However, now even with the increase in exports, the rapidly rebounding imports are likely to create pressures on the external side.

According to the Federal Board of Revenue (FBR), the rise in duty-free import value is mainly due to multiple exemptions introduced in the current fiscal year to provide relief to the general public. This move had also been taken in continuation of a more rationalized cascading tariff structure.

According to FBR, a 29 percent increase in the duty-free imports was noted in the import value of those items, which covered under various exemption schemes/regimes meant for the facilitation of the export sector, including DTRE scheme, manufacturing bonds scheme, export processing zone, etc.


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Exports in January reached $2.13 billion, up by 8.11 percent to $1.972 billion over the last year. In the seven months in concern, this figure increased by 5.53 percent, to $14.24 billion against $13.49 billion from the last year.

The country-wise distribution of January’s exports shows that Pakistan’s exports to Canada increased by 43 percent, to Australia by 42 percent, to the US by 36 percent, to the UK by 21 percent, to South Africa by 27 percent, to China by 21 percent, to Belgium by 18 percent, and to Saudi Arabia by 14 percent.

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