ISLAMABAD: Pakistan’s trade deficit narrowed by 18 per cent in the month of July 2022, according to data released by Pakistan Bureau of Statistics (PBS) on Tuesday.
The contraction in trade deficit may be attributed to decline in import bill. The import bill of the country fell by 13 per cent to $4.86 billion in July 2022 as compared with $5.57 billion in the same month of the last year.
However, the exports of the country also fell by 5.17 per cent to $2.22 billion in the month of July this year as compared with $2.34 billion in the same month of the last year.
The trade deficit sharply narrowed by 46.76 per cent to $2.64 billion in July 2022 when compared with $4.96 billion in June 2022.
The import billion declined by 38 per cent to $4.86 billion in July 2022 as compared with $7.88 billion in June 2022.
Meanwhile, the exports also fell by 24 per cent to $2.22 billion in July 2022 when compared with $2.92 billion in June 2022.
Analysts at KASB KTrade Securities attributed to the strict import control measures which were put in place last month.
They said this is the lowest trade deficit level in the last 15 months.
“We think this should support the current account situation and will provide some confidence to the investors regarding the ability of the government in dealing with macroeconomic challenges,” according to the analysts.
The analysis shows that assuming no change in demand, a 40 per cent reduction in oil prices would turn the deficit into a surplus. This means that if Pakistan had the ability to get cheaper energy from Iran or from Russia, it could have been sufficient to bridge the trade deficit.
“Indeed, that could have had much punitive geo-economics implications and might not be a viable strategy. This also illustrates that if the oil price supply shock due to Ukraine war ends, Pakistan’s economy could return to a more stable condition.”
Building foreign exchange reserves is the only defense strategy against external economic shocks.