Nov record high imports take trade deficit to around $5bn

December 2, 2021 (MLN): Pakistan's merchandise trade deficit has ballooned by 2.33x YoY during November 2021, standing at $4.963 billion on the back of higher imports growth than exports, according to the media reports showed on Thursday.

This rising import bill poses a serious threat on the external side while putting pressure on the home currency. As per foreign trade data, imports touched a record high of $7.847bn from $4.292bn recorded in the corresponding month last year, depicting an increase of 82.83%.

While expressing his concern over the mounting import bill, Arsalan Soomro, Analyst at KASB Securities said, "The import bill of the November is not sustainable from any angle. Let's take one-offs aside after the break-up." 

He asked the government to "cut down luxury and ultra-luxury imports. Tax them more. The short-lived growth could kink otherwise. Premature over-tightening hurts. Stagger-ize consumption.

Sharing the provisional break up of imports Spokesperson to Finance Minister Muzzammil Aslam said, “During November alone, energy imports stand at $2.4bn (+166%), raw material $2.2bn (+ 66%), capital goods & machinery $1.14bn (+72%), Food $911mn (+22%), vaccines $621mn (+2500%).”

This was attributed to soaring raw material prices due to supply disruption. While oil prices have also risen sharply, which has led to an increase in the import bill due to higher energy demand in the local market.

On Wednesday, Abdul Razak Dawood, adviser to Prime Minister on commerce and investment, shared the country’s exports numbers for November 2021 that jumped by 33% YoY to a historic monthly high of $2.884 billion as compared to $2.171bn during the corresponding period last year. While cheering the November exports numbers on social media, he mentioned the target set for the said month was $2.6bn.

In a recent report, the Ministry of Finance noted that the exports will start moving upward on the back of specific government policies to stimulate exports and low levels of the Real Effective Exchange Rate (REER).

Going by the trade data, the first five months of the current fiscal year (July- Nov FY22) witnessed a whopping two-fold increase in the trade deficit. In absolute terms, the merchandise trade deficit surged to $20.59bn in 5MFY22 from $9.724bn over the corresponding months last year.

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