‘Reduction in trade deficits, improvement in remittance inflows to improve Pakistan’s BoP’

Canadian research report says as the number of daily new cases and deaths are falling, the country is likely to remain open, lowering the odds of a domestic supply disruption

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Pakistan’s Balance of Payment (BoP) position is set to improve, on the back of reduction in the trade deficit and remittance inflows, said BCA Research – a Canadian foreign exchange company – in its latest research titled ‘BCA Overweight View in Pakistan Equities’.

The report said that the country’s trade deficit will shrink further, as Pakistan’s export will likely improve more than its imports. Pakistan’s total exports declined 6.8 percent year-on-year in June, which is a considerable improvement as compared to the massive 54 percent and 33 percent contractions that occurred in April and May, respectively, a national daily reported.

The report said that as the number of daily new cases and deaths are falling, the country is likely to remain open, lowering the odds of a domestic supply disruption. In addition, as DM growth recovers, the demand for Pakistani products will improve as well. Europe and the US together account for about 54 percent of Pakistan’s exports.

BCA expects that the government will likely approve the textile industry’s request for supportive measures, including access to competitively priced energy, a lower sales tax rate, quick refunds, and a reduction of the turnover tax rate to boost the performance of the domestic textile sector.

Furthermore, the government has prepared an incentive package for the global promotion of the country’s information technology (IT) sector, aiming to increase IT service exports from the current level of USD 1 billion to USD10 billion by 2023.

Regarding Pakistan’s imports, low oil prices will help reduce the country’s import bill year-on-year over the next six months, opined the report. Talking about Pakistan’s remittance inflows, the report said that even though about half of the remittances sent to Pakistan are from oil-producing regions like Saudi Arabia, UAE, Oman, and Qatar, low oil prices may only have a limited impact on Pakistan’s remittance inflows.

At the same time, the government has planned various measures to boost remittances. For example, a “national remittance loyalty program” will be launched on September 1, 2020, in which various incentives would be given to remitters.

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