Trade deficit may widen with increasing Intl commodity prices

01 Apr '08

2 min read

With regard to the impact of rising global commodity prices and ever-growing demand for various products, the State Bank of Pakistan is expecting widening of trade deficit in the remaining part of the current fiscal year.

It has been observed that rising international commodity prices (oil) combined with failure to meet demand for supplies of crucial commodities have resulted in 21.9 percent year-on-year rise in imports during July-February 2007-08.

These high import figures virtually outperformed the 7.9 percent growth in exports during the same period.

Trade deficit was one of the direct consequences of this trend recording a US $3.5 billion year-on-year increase with ratio worsening from 6.2 percent in July-February of 2006-07, to 7.9 percent this year.

Textile exports in particular, saw a year-on-year drop of 3.4 percent. However, synthetic fabrics, ready-made garments and textile made-ups registered a growth nonetheless.

Decline in overall textile exports was attributed to supply sides constraints caused largely due to rising cost of production, increasing domestic cotton prices and tariff rates and recurrent power shortages.

Moreover, recession in US economy has also impacted the exports of textile and apparel products and thereby the overall demand.

In fact, imports are expected to increase and so will the import bill due to rising demand for agricultural and chemical products as well as for power generating machineries.

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