Pakistan's trade deficit with neighbouring countries swells

The government has allowed maximum imports from Afghanistan in the rupee on a land route in the post-Taliban regime period. The figures did not reflect those imports made in rupees.
Image used for representational purpose only. (File photo)
Image used for representational purpose only. (File photo)
Updated on: 
4 min read

ISLAMABAD: Pakistan is currently witnessing a deep trade deficit with neighbouring countries as the country's imports to nine regional countries have risen almost twice in comparison to the exports of the South Asia nation, media reports said citing latest data released by the State Bank of Pakistan.

The exports of Pakistan to nine neighbouring countries rose 16.97 per cent while imports grew by nearly 28.84 pc in the Fiscal Year 2021-22 in comparison to the figures a year ago, the latest data released by the State Bank of Pakistan showed.

As a result of huge imports, Pakistan's trade deficit with the region expanded during the period under review.

The country's exports to Afghanistan, China, Bangladesh, Sri Lanka, India, Iran, Nepal, Bhutan and the Maldives account for a small amount of USD 4.590 billion -- just 14.43 per cent of Pakistan's total global exports of USD 31.79 billion in FY22, reported Dawn.

China has topped the list of Pakistan's regional exports. Islamabad carried out trade with its farther neighbours Nepal, Sri Lanka, Bhutan, Bangladesh and the Maldives via sea only.

On the other hand, imports from these countries edged up to USD 17.814bn in FY22 against USD 13.826bn over the corresponding period last year, an increase of 28.84 per cent.

Pakistan's exports to China posted an accelerating rise in 2021-22. The bulk of the regional exports share, which accounts for 60.58 per cent, is with China while the remaining is for eight countries. Pakistan's exports to China posted a growth of 36.12pc to USD 2.781bn in FY22 from USD 2.043bn in FY21.

It must be noted that the increase in Pakistan's export proceeds was noted in the post-Covid period especially the exports of rice.

However, Pakistan's imports from the neighbouring countries have gone for a toss. The imports from China grew 30.03 pc to USD 17.296bn during the period under review against USD 13.301bn over the last year. The bulk of 97.09 per cent of imports is coming from China alone while the remaining imports are from other eight countries.

In terms of Afghanistan, Pakistan's exports to the country posted a negative growth of 43.8 per cent to USD 552.518 million in FY22 from USD 983.314m in the same period in FY21.

Afghanistan, till a few years ago, was the second major export destination for Pakistan after the United States. However, the exports to Afghanistan have taken a negative hit. Imports from Afghanistan posted a negative growth of 17.84 per cent to USD 147.249m against USD 179.223 million over the last year mainly driven by higher arrivals of essential kitchen items including tomatoes, potatoes and onions as well as fresh and dried fruits.

The government has allowed maximum imports from Afghanistan in the rupee on a land route in the post-Taliban regime period. The figures did not reflect those imports made in rupees.

Pakistan's exports to Iran on the official channel remained zero in FY22. Most of the trade with Tehran is carried out through informal channels in border areas of Balochistan. No imports were made from Tehran during the period under review.

Exports to Bangladesh increased 41.28 per cent to USD 870.604 million in FY22 from USD 616.202 million. Imports from Dhaka grew 28.06pc to USD 97.500m this year against USD 76.134m over the last year.

Similarly, exports to Sri Lanka increased by 38.72pc to USD 373.412m in FY22 from USD 269.168m in the previous year. The imports from Sri Lanka dipped 3.96pc to USD 81.728m from USD 85.102m over the previous year.

On the other hand, Pakistan's exports to Nepal increased by 26.2pc to USD 5.775m in FY22 from USD 4.576m the previous year. However, imports rose by 12.62pc to USD 1.401m this year against USD 1.244m over the last year.

Exports to the Maldives increased by 14.29pc to USD 6.917m from USD 6.052m. Import jumped 1,314pc to USD 1.301m this year against USD 0.092m over the last year.

Export proceeds to Bhutan were recorded at USD 0.082m in FY22 against USD 0.159m over the last year, a decline of 48.42pc. The imports from Bhutan were noted at USD 2.499m in FY22 against USD 0.075m over the previous year, an increase of USD 2.424m or 3232pc, as per the media portal.

Meanwhile, Pakistan Prime Minister Shahbaz Sharif's coalition government, which took over in April 2022, is grappling with multiple political and economic crisis.

Its current account deficit has surged to USD 17.4 billion or 4.6 per cent the size of the economy during the last fiscal year on the rising trade deficit. A surging current account deficit amid depleting dollar inflows from multilateral and bilateral lenders, as well as shrinking foreign investment have brought the foreign exchange reserves and rupee under enormous pressure over the last several months. It has stoked rapid inflation, forced the State Bank to boost borrowing costs to a multiyear high and eroded investor confidence in the economy. The deepening political turmoil is spawning doubts about the government's ability to make tough decisions going forward and tackle the longstanding structural issues of the economy responsible for the recurring balance-of-payments crisis.

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