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Rising trade deficit

Rising trade deficit

 

According to Pakistan Bureau of Statistics, Pakistan’s trade deficit has increased to $12.1 billion in first four months of the current fiscal year, showing that the government still has to go a long way to keep a balance between exports and imports. The government introduced heavy regulatory duties on a host of goods in October, apparently, to curb imports, but economists believe the step was merely a ploy to increase revenues. Pakistan’s import bill was $53 billion during the fiscal year 2016-17, but the total regulatory duties imposed in the name of import cuts is less than $400 million, showing that volume of imports will continue to grow in the times to come.

Reports suggest that the volume of imports exceeded exports by $12.13 billion in monetary terms during the last four months of the current fiscal year, increasing the trade deficit by 31.24 percent as compared to the same period of last year. The country incurred record trade deficit of $32.4-billion during the last fiscal year and there is no plan in the official manual to control the situation.The annual target of exports this year is $25.7 billion, but the trade gap in the first four months has reached 48 percent, showing the fact that there will be no cut in current account deficit this year too.

Whenever this situation appears, the government policymakers resort to incongruous steps to reach a solution and met with failures at the end. The country needs cheap electricity, tax concessions and minimum involvement of government agencies in the business activities. But unrealistic tax rates, inconsistent import and export policies and lack of interest of the commercial attachés to introduce Pakistani products abroad are some of the big hurdles in the enhancement of exports and development of the local industry. The government has set the export target around $3.4 billion more than the last year’s, but imports are twice than the export volume and imposition regulatory duties will have little impact on the trade deficit.

The only workable solution to problem is to increase exports without compromising on the volume of imports. If duties are imposed on imports, smuggling will increase, which is more harmful for the national economy than the trade deficits. Until and unless the government authorities make a comprehensive policy in coordination with all the stakeholders, the country will continue to suffer trade deficit, current account deficit and many other woes.