Jul-Nov trade deficit down by 37.57pc due to weak rupee

Figures show exports at $7.61bn, imports at $13bn against $8.2bn and $16.99bn in the same period of last year

Sunday, December 13, 2009
By Israr Khan

ISLAMABAD: Helped by the weaker value of rupee, Pakistan’s trade deficit (an excess of imports over exports) during July-November 2009-10 narrowed by about two-fifth (or $3.29 billion) over the corresponding period of the last fiscal, official figures show.

Although, to some extent the weaker rupee is helping economy in reducing exports-imports gap, yet it is also instrumental for mounting pressures on the country’s external debt (i.e. each dollar debt needs more rupees to retire or service it).

According to the Federal Bureau of Statistics (FBS) latest trade snapshot, the deficit during these five months stood at $5.477 billion which is 37.57 per cent less than what was recorded in same period of last fiscal ($8.77 billion).

Exports during the period recorded at $7.61 billion and imports at $13.08 billion that stood at $8.2 billion and $16.99 billion respectively during same period of last year.

In November 2009, trade deficit shrank by 28.28 per cent to $986.52 million while in previous October it stood at $1.37 billion.

During the month under review, exports declined by 3.39 per cent to $1.54 billion and imports by 14.91 per cent to $2.53 billion over previous month.

Pakistan’s external debt and liabilities at the end September 2009 stood at $55.216 billion. Keeping in view the impact of rupee depreciation on total debt burden in absolute terms, each one rupee increase in US dollar would cost the economy about more than 55 billion rupees.

The FBS figures also reveal that during November 2009, exports increased by 0.97 per cent and imports declined by 6.94 per cent over November 2008, when exports stood at $1.527 billion and imports at $2.72 billion.

Government’s economic policymakers should think about the negative and positive fallouts of currency depreciation on economy.

There is a trade-off between mounting debt burden and reduced trade deficit as a result of weakening rupee. This calls for coordinated efforts of federal government and the central bank.

This is encouraging that trade deficit is coming down. It would also help safeguard its economy from external shocks as a result of current account deficit-disturbing the country’s financial balance sheet.

Last year in November, to avert huge current account deficit problem, Pakistan had to enter a $7.6 billion emergency International Monetary Fund (IMF) programme.

The loan was increased to $11.3 billion in July this year, of which the IMF has so far disbursed over $5 billion.

The central bank’s latest data reveal that the current account deficit in the first four months July-October of fiscal year 2009-10 fell sharply to $1.07 billion, compared with a deficit of $6.65 billion in the same period last year.