According to Pakistan Bureau of Statistics (PBS), trade deficit of Pakistan during FY 17 was 36% higher than the trade deficit reported in FY 16. A similar trend was also witnessed in the first quarter of 2018.
Pakistan’s current exports are standing at $20 billion only while imports have sky-rocketed to more than $53 billion causing an increase in the trade deficit of the country. Pakistan has been making efforts to boost its exports and cut down its imports by providing relief packages to the exporters that included sales tax refunds and cash subsidies.
The government also increased import duties on more than 300 items including vehicles, cosmetics, footwear in a bid to discourage imports. Pakistan has higher import rate of goods particularly import of primary goods.
According to World Trade Organization (WTO), Pakistan is amongst the top 20 countries in terms of high tariff rates.
While imports have been on the higher side, exports have been insufficient to deal with the increasing imports. Pakistan’s exports as a percentage of GDP were only 8.7% in 2016 as compared to the global average of 29% in 2015. The 8.7% contribution to the GDP was the lowest recorded by Pakistan since 1971.
While the situation has been grim for Pakistan, it is expected that exports during the FY 18 and FY 19 are likely to increase by 4.7% and 10.50% respectively. Another thing that the government needs to do is to be a little bit more flexible on the exchange rate so that it can determine its own position and is not overvalued, as the case right now is.