TRADE STATISTICS - JULY-AUG FY08
Sep 17 - 23, 2007
Pakistan trade deficit continued to grow higher as during the first two month of the fiscal year the deficit increased by 10.12% to US$2.359 billion during July-August of the fiscal 2007-08 as against $2.143 billion over the same months last year. In the first two months (July-Aug) export proceeds stood at US$2.963 billion as against US$2.840 billion over the same months of the last year, indicating a growth of 4.31%. According to the statistics, the current two months import bill reached US$5.322 billion up by 6.81% from US$4.983 billion over the same months of the last year.
In the month of July the trade deficit witnessed a modest decline of 2.59% in the trade deficit as a result of very nominal increase in imports while exports grew at slightly higher rate. However, during the month of August, the trade deficit witnessed a robust growth of 23.97% to US$1.270 billion in August 2007 as against US$1.025 billion over the same month of the last year. This unexpected increase in the trade deficit occurred due to surge in imports of commodities and decline in exports proceeds during the month under review over the last year.
After a huge deficit of more than Rs13 billion in the last year against the projected trade deficit of $9.4 billion, government under the trade policy 2007-08, first time had not projected any estimates for import bill for the year 2007-08 with an assumption that imports could not be estimated while it has projected a target of US$19.2 billion for exports during FY08.
The government had already missed two consecutive yearsí exports targets mainly because of dismal performance of the textile sector and decline in export of traditional products. Apart from that major setback is the steady decline in the production of large scale manufacturing sector and heavy reliance on few industries. This year target would again depend on performance of textile sector as government has again announced a hefty package of subsidies and financial assistance for the sector with a hope to record a double digit growth as against the 6% growth last year.
TEXTILE EXPORTS GROWTH SLOWING
Pakistanís textile exports have taken a sudden turn for the worse after two years into the post quota regime. Textile exports managed to increase at a very decent growth of 16% in FY06 (compared to a historical five-year average annual growth rate of 11%). However the same in FY07 started on a low note but took a leap off after government announced subsidy package to the industry. Textile export share in the total export of Pakistan has declined from 67% in FY97 to 62% in FY07. This slow growth in the textile exports can be attributed to heating up of competition from the likes of China, India, Bangladesh and Turkey, higher cost of doing business owing to a hike in interest rates, higher cotton and gas prices and industry fragmentation which has resulted in strong price competition and inability to pass on the higher costs.
PAKISTAN AND INDIA TRADE TO REACH US$10 BILLION
For the very purpose of increasing the exports and strengthening of bilateral talks between the arch rivals, India and Pakistan have announced an ambitious goal on to increase their trade by six times to US$10 billion by 2010. The countries were of the opinion that they would allow their banks to open branches across the border, widen the trade basket, improve transport links and chip away at tariffs that have limited business and encouraged indirect trade and smuggling. A joint statement said the neighbors had set deadlines to allow two bank branches to be opened on either side to help traders. They had also exchanged lists to consider cutting tariffs and increasing the number of items that can be traded, restricted at present to about 1,800. In FY06, Pakistan's exports to India stood at US$323 million while Indian exports to Pakistan crossed one billion dollars in 2005-2006 while in FY07, the trade between the countries rose to US$1.7 billion which they believe to enhance in the years to come.
Pakistan is likely to benefit from global tariff reductions, but needs to address a host of challenges like low competitiveness, low productive capacity, export diversification, low quality products, export industries, unprecedented demand for energy, market access for the EU and US requirement of compliance with social, environment, and health standards.