ISLAMABAD: Pakistan’s trade deficit saw a slight increase, reaching $5.4 billion in the first quarter of the current fiscal year. This rise is attributed to a double-digit growth in exports, alongside tight controls on imports, which helped maintain foreign exchange reserves at $10.5 billion.
According to data from the Pakistan Bureau of Statistics (PBS), exports surpassed the $2.8 billion mark in September for the first time in four months. Total merchandise exports for the first quarter (July-September) amounted to $7.9 billion, marking a $974 million increase, or 14.1%, compared to the same period last fiscal year.
This uptick in exports nearly matched the $1.02 billion loan tranche received from the International Monetary Fund (IMF) at an interest rate of approximately 5%.
The current fiscal year has shown promising trends in both exports and remittances from overseas Pakistanis—two vital non-debt creating sources of foreign inflows. Together, these streams provide an essential cushion of around $600 million per month to the government, which continues to grapple with limited foreign exchange reserves.
Following the IMF’s latest financial support, gross official foreign exchange reserves have risen to approximately $10.5 billion, although they remain below the minimum threshold needed for three months’ worth of import coverage.
Imports increased by nearly 10%, amounting to $13.3 billion in the first quarter, according to the national data agency. As a result, the trade deficit widened by 4.2%, or $224 million, largely due to the robust export performance.
Last fiscal year, rice exports significantly boosted Pakistan’s total exports, but competition has intensified as India lifted its ban on rice exports. Global prices for various rice varieties have dropped recently, following actions from both India and Pakistan to remove price caps and resume exports.
PBS data reveals that the trade deficit rose by 20% in September compared to the same month last year, reaching $1.8 billion. Exports for September totaled $2.8 billion, a $334 million increase (13.5%), while imports surged to $4.6 billion.
The trade deficit also saw a 2% month-on-month rise to $1.8 billion, driven by modest growth in both exports and imports.
Pakistan’s external debt inflows had stagnated prior to the IMF’s involvement, but with the approval of a $7 billion three-year program, the country is expected to sustain its foreign currency reserves in the double digits.
However, the IMF has reiterated the necessity of currency depreciation, emphasizing that a flexible exchange rate is crucial for enhancing competitiveness and rebuilding reserves.
The relatively low import levels are adversely affecting revenue targets set by the Federal Board of Revenue (FBR). In the first quarter of FY25, the FBR collected Rs901 billion in import taxes, which constituted 35% of total tax revenue, down from 40% the previous year. Before the economic crisis two years ago, import taxes accounted for over half of total tax receipts.
Historically, Pakistan’s monthly import bill ranged from $6 billion to $6.5 billion, but the government has since restricted it to below $5 billion due to dwindling foreign exchange reserves.
