ISLAMABAD: The government has been asked to adopt import compression policy to help curb the rupee slide, depleting foreign exchange reserves, trade deficit, rising inflation and public debt.
Speaking about the state of economy, Dr. Ashfaque Hasan Khan, a former economic adviser to the government, and Dean National University of Science and Technology (NUST), told WealthPK that the country’s trade deficit has so far increased to $35.4 billion during the current fiscal year 2021-22 (FY22), and is heading towards $50 billion by the end of the fiscal, which will be an all-time high if the current import trend and economic uncertainty continue.
The noted economist said he has been asking the government and the State Bank of Pakistan for the last four years to adopt an aggressive and yet selective import compression policy. He said there is a need to impose a ban on certain luxury and fast-moving items to reduce imports.
“The economic uncertainty in Pakistan has dented local and foreign investors’ confidence. Investors, trade and the business community will likely withdraw their investment from the country if the prevailing situation persists,” the former adviser on economy cautioned.
It is to be recalled here that the government had set the annual trade deficit target at $28.4 billion, which has already been exceeded in the first seventh months of the current fiscal year as imports have significantly been higher than expected.
According to the data released by the Pakistan Bureau of Statistics (PBS), the trade deficit jumped by 70% to $35.4 billion in July-March 2021-22, compared to $20.8 billion in the same period of 2020-21.
Imports in the July-March period of 2021-22 increased nearly by half to $58.7 billion.¬ The government had set the yearly import target at $55.2 billion, which has already been breached in the nine months of the current fiscal year.
Exports climbed nearly 25% in the first nine months of the current fiscal year and stood at $23.9 billion against $18.7 billion in the same period of the last fiscal year.
However, the trade deficit remained at an all-time high despite the dramatic increase in exports.
According to the PBS’s monthly data on foreign trade statistics, the trade deficit in March 2022 was $3.44 billion. It increased by 5.48% compared to March 2021 and by 11.63% compared to February 2022.
The expanding deficit is taking a heavy toll on the foreign exchange reserves, which are on a downward trend as the current account deficit widens and debt payments rise.
The central bank’s foreign currency reserves have been constantly declining, reaching $12 billion on March 25 – insufficient to finance two months’ worth of imports.
The Pakistani rupee also hit an all-time low against the US dollar on April 6, trading at Rs185.40 in the interbank market, reports WealthPK.
According to the figures released by the SBP, Pakistan’s foreign direct investment fell by 33% year-on-year in February 2022.
Pakistan urgently needs dollar inflows to restore confidence; otherwise, the country risks entering a major external account crisis.
INP
