TRADE DEFICITS WIDEN IN ASIAN ECONOMIES

MOHAMMED ARIFEEN
(feedback@pgeconomist.com)

June 4 - 10, 20
12

Pakistan's trade deficit further widened by 45.01 per cent during the first 10 months (July- April) of the current fiscal year over the same period of last year with total trade deficit rising from $12.171 billion last year to $17.649 billion this year.

Pakistan imports were at $37.042 billion against the exports of $19.393 billion during the first 10 months of the current fiscal year. Exports declined to $19.393 billion during July-April 2011-12 from $20.092 billion for the same period previous year. The imports on the other hand showed a substantial increase of 14.81 per cent during the period and reached $37.042 billion in the current fiscal year as compared to $32.263 billion last year.

Rising petroleum prices in the international market and the import of other commodities such as fertilizer and food items have contributed to rising import bill.

The Economic and Social Survey of Asia and Pakistan launched by the UN expressed concern about the current account of Pakistan, saying that Pakistan's current account is expected to register a large deficit in 2012.

Monthly figures showed that trade deficit in April 2012 increased by 72 per cent over the same period of last year, with trade deficit going up from $882 million in April 2011 to $1.517 billion in April 2012. Pakistan exports declined by 5.29 per cent in the month of April 2012 over the same month of previous fiscal year with total exports at $2.240 billion in current fiscal year from $2.365 billion last year. The imports on the other hand for the same period depicted increase of 15.71 per cent on account of $3.757 billion imports in April 2012 compared with $3.247 billion in April 2011.

The State Bank of Pakistan, International Monetary Fund and other international financial institutions have already expressed their concern over the slowdown in growth of country's exports. They had requested Pakistani economists to make substantial arrangements for foreign exchange inflows to maintain foreign exchange reserves level at relatively stable level, otherwise, the increasing trade deficit would have an adverse impact on the country's foreign exchange reserves as well as put pressure on the rupee against other major currencies.

Local economist believe that due to the eurozone debt crisis, Pakistan's exports to European Union will witness damaging impact. However, they say that duty free market access on 75 Pakistani products in EU markets would help diminish this inauspicious impact. Oil prices in the global market could also increase further due to the Iranian crisis.

If the current trend in the balance of trade goes on, other components of the current account like home remittances would not be able to fulfill the gap. In this context, Pakistan could face severe problems like the decline of foreign exchange reserves and further depreciation of the exchange rate of the rupee.

If such trend continues then the country could lose its present foreign exchange reserves in about a year's time and then be forced to seek IMF assistance with harsh conditionalities to avoid insolvency.

At the current pace, the export target is also likely to be missed, largely because of a drop in cotton prices in the international market and inability of exporters to add value to traditional export products.

The trade figures have also surprised the IMF. In its latest report on Pakistan, the IMF has estimated that exports may drop 1.8 per cent while imports can rise 9.2 per cent. Independent experts have predicted a $19 billion trade deficit.

The IMF has assessed that Pakistan's foreign currency reserves may drop to $12.1 billion due to deteriorating external account, which will be not enough for three months of imports.

It is high time for the government to analyze the latest trends in the trade balance carefully and do everything possible to lessen the arising unbalance to save the country from another crisis.

INDIA

India trade deficit has risen to an incredible $185 billion for the financial year 2012 ended March due to shooting up abruptly of crude oil prices in the international market. India crude oil bill reached to the $150 billion mark while gold and silver imports were valued at $60 billion.

JAPAN

Japan registered a bigger-than-expected trade deficit in April. Rising energy costs pushed up imports while shipments to China fell from a year ago. The monthly deficit of 520.3 billion yen (US$6.5 billion), was larger than the 477.7 billion yen in the same month a year ago and the highest ever for April.

Japan had a 274.2 billion yen trade deficit with its Asian neighbor, which overtook it as the world's second-biggest economy in 2010, as exports fell 7.1 percent, the seventh consecutive month of year-on-year drops. Japan confronted by increasing ageing population and loosening manufacturing sector, were likely to generate trade deficits throughout 2012.

SRI LANKA

Sri Lanka's trade deficit during the year 2011 has risen to $9.74 billion, an increase of 99.6 percent over the previous year's figure of just $4.88 billion. The country's total export earnings during the year 2011 has risen by 22.4 per cent year on year to achieve a figure of $10.48 billion, while its import bill has climbed up to US$ 20.23 billion, an year on year increase of 50 per cent. Sri Lanka's trade deficit widened 67.5 per cent to $701.8 million in February from $418.9 million in the same month last year.