KARACHI – Pakistan’s trade deficit has shown signs of improvement, narrowing by $1 billion or 5.6 percent during the first half of the fiscal year 2018-2019.
This positive trend is significant and may have a substantial impact on the country’s overall economic outlook.
According to statistical data, Pakistan’s exports for this period were recorded at $11.1 billion, indicating a growth of 1.7 percent compared to the previous year. In contrast, the country’s imports for the same period stood at $28.1 billion, marking a decline of approximately 3 percent. The trade numbers for the month of December 2018 further reinforced this trend, with exports reaching $2 billion, up by 4 percent compared to the previous year, while imports dropped to $4.5 billion, down by 8 percent.
As a result of these developments, Pakistan’s trade deficit for the period from July to December 2018 was recorded at $16.9 billion, reflecting a 5.6 percent decrease, equivalent to $1 billion less compared to the previous year. Analysts at Topline Securities pointed out this improvement.
The more favorable trade balance can be primarily attributed to reduced oil-related imports. Furnace oil imports, in particular, have seen a dramatic reduction of 90 percent, with only 300,000 tons imported during the first half of FY19 compared to the 3 million tons during the corresponding period last year. This decrease is a consequence of the government’s efforts to promote alternative fuels for power generation, such as Re-Gasified Liquefied Natural Gas (RLNG) and coal.
Similarly, diesel imports have also dropped by 36 percent, with 1.4 million tons imported in comparison to 2.1 million tons the previous year. The shift toward more sustainable and cost-effective energy sources has played a pivotal role in reshaping the trade dynamics.
On a monthly basis, the trade deficit for December 2018 stood at $2.4 billion, which represents a notable 17 percent decrease, equivalent to $500 million less compared to the previous year. This significant monthly improvement suggests that Pakistan could potentially achieve a current account deficit (CAD) of less than $1 billion for December 2018, a significant reduction from the $1.3 billion reported in November 2018.
The analysts estimate the current account deficit for the entire fiscal year 2018-2019 (FY19) to be in the range of $10-12 billion, which is a substantial reduction from the $18 billion recorded during FY18. These improvements in trade balance and current account deficit are encouraging signs for Pakistan’s economic stability, and if sustained, they could contribute to the country’s overall economic growth and financial health.
