Muhammad Hamdan Khan

Registration Number: -2020294

Money and Banking (MS-356)

PAKISTAN IMPORTS, EXPORTS AND TRADE DEFICIT

Introduction:-

According to the latest data released by the Pakistan Bureau of Statistics (PBS), Pakistan's trade deficit (a
trade deficit is causes when the value of a countries imports exceeds the value of its exports) has fallen
by 39.62 percent to $23.713 billion during the first 10 months (July-April) of the current fiscal year 2022-
23, compared to $39.272 billion during the same period last year.

The trade data also shows that the country's exports during July-April (2022-23) were recorded at
$23.174 billion against exports of $26.247 billion in July-April of 2021-22, a decline of 11.71 percent.

This decrease in the trade deficit can be assigned to the significant reduction in imports, which fell by
28.44 percent during the period under review, going down from $65.519 billion last year to $46.887
billion during the current year. Considering the year-on-year basis, Pakistan is facing the following
situation: -

 Exports of the country fell by 26.68 percent and were recorded at $2.124 billion in April 2023
against the exports of $2.897 billion in April 2022.
 At the same time, imports also went down by $2.953 billion in April 2023 from $6.661 billion in
April 2022, which shows a negative growth of 55.67 percent.
 The trade deficit decreased by 77.98 percent in the year on year basis to $829 million in April
2023 as compared to $3.764 billion in April 2022.

Data from the month-on-month basis shows that:-

 Exports of the country in the month of April 2023 fell by 10.46 percent as compared to the
exports of $2.372 billion in March 2023.
 Imports into the country also went down by 22.62 percent in April 2023 when compared to the
imports of $3.816 billion in March 2023.
 The trade deficit decreased by 42.59 percent on a month-on-month basis and stood at $829
million in April 2023 as compared to $1.444 billion in March 2022.

Analysis:-

The current economic situation of Pakistan shows a fall in the trade deficit, a fall in the imports and also
a fall in exports. Now this situation is has both positive and negative outcomes for Pakistan. Over the
previous years, Pakistan has been facing rising inflation rates and it was almost nearing a failure to pay
back its debts to creditors.

The data revealed by Pakistan Bureau of Statistics regarding the trade deficit decrease is a positive sign
for the economy of Pakistan. We must note that a trade deficit is when the value of your imports go
higher than the value of your exports. This means that a lower or falling trade deficit means that the
value of your exports are rising. This falling trade deficit will not only reduce the country's dependence
on foreign loans to finance the deficit but will also help in promoting local businesses and manufacturers
to produce more goods and services and help in exports. Another good news for the economy is the
decrease in imports. This will help to ease the pressure on the country's foreign exchange reserves,
which have been under strain in recent years due to a high import bill.
On the other hand, the negative aspect is the fall in exports of Pakistan. This is a cause for concern
because it suggests that the country's efforts to boost exports have not yet yielded the desired results.
We must know that a fall in exports is because the local industries are not encouraged enough to
produce more goods and services, the legal conditions are not right for businesses to operate, there is
political uncertainty etc. and this means that this fall in exports is not only badly impacting the local
businesses but the entire economy of the country.

Reviving the economy:-

Pakistan’s exports have been lagging behind those of its regional competitors, like India and Iran and the
government has been implementing a range of measures to boost exports. Including offering incentives
to exporters and providing subsidies for the export of certain goods. However these Incentives alone are
not enough. The economy needs more work.

As mentioned before, the fall in imports and the fiscal deficit is good news but it is the fall in exports the
government need to take into consideration. Pakistan is facing a low export rate compared to the
previous years due to the following reasons:-

 Political uncertainty:-The recent government transitions has caused to change many policies
with it which badly impacted the local businesses.
 Legal issues:-Bureaucratic red tape and legal issues are causing businesses to shut down.
 Lack of Investment (Foreign Direct Investment):-Because of political uncertainty and legal
issues, investors are not motivated to invest in the country.
 Shutdown of large and medium enterprises:-Enterprises are shutting down due to lack of
political stability, rising inflation and other legal issues.
 Lack of skilled labor force:-Lack of investment by the government in the educational sector.
 Lack of manpower: - Lack of investment by the government in producing a technically skilled
workforce.
 Rising inflation: - The uncontrolled inflation rates are causing the car industry businesses to shut
down.
 Ban on imports during the recent years: - Manufacturers cannot import cheaper materials from
abroad which causes the locally manufactured goods to rise in prices hence leading to inflation.

To tackle these problems, there is a need for the government need to focus on improving the country's
overall business environment, which has been a major hindrance to the growth of exports. This includes
addressing issues such as high taxes, corruption, and red tape, which have made it difficult for
businesses to operate in Pakistan.

In addition, the government needs to focus on developing new export sectors, such as IT services and
pharmaceuticals, which have the potential to become major drivers of export growth in the future. This
will require investments in education and research and development, as well as the creation of an
enabling environment for these industries to flourish.

Furthermore the government need to provide better policies for other businesses to invest in the
country for example starting with lower taxes, access to funding and also creating a supportive legal
environment for businesses.
Overall, while the reduction in the trade deficit is a positive development for Pakistan's economy, there is
still much work to be done to boost exports and improve the country's business environment. The
government needs to continue its efforts to create a more business-friendly environment, while also
investing in new export sectors and promoting innovation and entrepreneurship. If these efforts are
successful, Pakistan can become a major industrial hub not only because of more businesses but also
because of the geographical location that the country is located in.