Samlee
Trusted Member
Exports drop further; imports increase at faster pace
ISLAMABAD:
Pakistan has booked over $19 billion trade deficit during the first half of the current fiscal year as exports further plunged and imports increased faster than projections on the back of trade liberalisation, keeping the external sector stability under pressure.
The Pakistan Bureau of Statistics (PBS) reported on Friday that the gap between imports and exports reached $19.2 billion during the July-December period. The deficit was nearly $5 billion, or 35%, higher than the same period of last fiscal year, according to the national data collecting agency.
The half year's deficit was also equal to two-thirds of the annual official target, indicating that the central bank may have to buy more dollars from the local market than initially planned to keep the foreign exchange reserves at reasonably comfortable levels.
The trade summary showed that exports fell against all the three monitored benchmarks — month-on-month, year-on-year and half year.
PBS stated that exports fell to $15.2 billion during the first half of the current fiscal year, down 8.7% on a yearly basis. In absolute terms, exports were $1.5 billion less than the same period of last year. Six-month exports were equal to only 42% of the annual target.
The government has cut import taxes in the budget to liberalise trade and based on World Bank's estimates, the trade liberalisation should result in 14% increase in exports compared to only a 7% rise in imports. However, the results of the first half of the fiscal year have not supported the World Bank's assumptions.
Exporters are complaining about the overvalued rupee, which according to them has eroded their profitability. The national coordinator of the Special Investment Facilitation Council last month called for making the exchange rate regime more reflective of the ground realities.
The rupee-dollar parity remained around Rs280.1 to a dollar on Friday. The central bank is letting the rupee appreciate but in a gradual fashion with gain of one or two paisa every day against the greenback.
Contrary to exports, imports grew to $34.4 billion during the July-December period, a jump of $3.5 billion, or 11.3%, compared to a year ago. Imports were equal to more than half of the annual target and were putting pressure on the external sector.
However, the central bank is offsetting the higher import cost through increased inflows of remittances and major purchases of foreign currency from the local market.
PBS stated that exports further decreased to $2.3 billion in December, down $594 million, or 20.4%, from the same month of last year. It was the fifth consecutive month of decline in exports.
Imports grew 2% to over $6 billion in December. It was the sixth consecutive month when imports stayed above $5 billion and for the first time crossed $6 billion in the current fiscal year. In absolute terms, imports increased $118 million last month.
As a result, the trade deficit widened one-fourth to $3.7 billion, up $712 million. On a month-on-month basis, the trade deficit also increased 28% due to the reduction in exports and the double-digit increase in imports.
As exporters were already struggling to remain globally competitive, they faced yet another challenge at the hands of the Federal Board of Revenue (FBR). The tax machinery has directed its field formations to pick at least 70 exporters for scrutiny of their income tax returns.
The FBR stated that an analysis carried out at its headquarters revealed that a significant number of exporters, associations of persons and companies substantially reduced their declared taxable income for tax year 2025 after the taxation regime for export proceeds was modified from the final tax to the minimum tax, according to the FBR's instructions.
These instructions showed that all field formations were directed to closely examine the declarations of major exporters falling within their respective jurisdictions to ascertain whether there was any abnormal reduction, inconsistency or change in declaration patterns after the amendment.
However, Pakistan Retail Business Council Chairman Ziad Bashir complained to the prime minister about the FBR's action. "At a time when Pakistan's export sector is already under stress owing to some of the highest effective tax burdens, energy tariffs, interest rates and financing costs in the region, the issuance of such broad, open-ended scrutiny instructions sends a deeply troubling signal to the business community," Ziad wrote to the PM.
The FBR was forced to give a public explanation after the hue and cry made by the exporters. In a press statement issued on Thursday, the FBR said "in order to mitigate the possibility of any bonafide or other errors, the field formations were directed to pursue the returns and process them in accordance with the law, wherever any legal inconsistency is identified."
Conducting desk audits of returns and ensuring compliance with tax laws is the statutory and primary responsibility of the FBR, it added. The FBR said that to prevent any inconsistency, misuse or undue inconvenience to taxpayers, this exercise has been initiated under the supervision of the FBR headquarters.
ISLAMABAD:
Pakistan has booked over $19 billion trade deficit during the first half of the current fiscal year as exports further plunged and imports increased faster than projections on the back of trade liberalisation, keeping the external sector stability under pressure.
The Pakistan Bureau of Statistics (PBS) reported on Friday that the gap between imports and exports reached $19.2 billion during the July-December period. The deficit was nearly $5 billion, or 35%, higher than the same period of last fiscal year, according to the national data collecting agency.
The half year's deficit was also equal to two-thirds of the annual official target, indicating that the central bank may have to buy more dollars from the local market than initially planned to keep the foreign exchange reserves at reasonably comfortable levels.
The trade summary showed that exports fell against all the three monitored benchmarks — month-on-month, year-on-year and half year.
PBS stated that exports fell to $15.2 billion during the first half of the current fiscal year, down 8.7% on a yearly basis. In absolute terms, exports were $1.5 billion less than the same period of last year. Six-month exports were equal to only 42% of the annual target.
The government has cut import taxes in the budget to liberalise trade and based on World Bank's estimates, the trade liberalisation should result in 14% increase in exports compared to only a 7% rise in imports. However, the results of the first half of the fiscal year have not supported the World Bank's assumptions.
Exporters are complaining about the overvalued rupee, which according to them has eroded their profitability. The national coordinator of the Special Investment Facilitation Council last month called for making the exchange rate regime more reflective of the ground realities.
The rupee-dollar parity remained around Rs280.1 to a dollar on Friday. The central bank is letting the rupee appreciate but in a gradual fashion with gain of one or two paisa every day against the greenback.
Contrary to exports, imports grew to $34.4 billion during the July-December period, a jump of $3.5 billion, or 11.3%, compared to a year ago. Imports were equal to more than half of the annual target and were putting pressure on the external sector.
However, the central bank is offsetting the higher import cost through increased inflows of remittances and major purchases of foreign currency from the local market.
PBS stated that exports further decreased to $2.3 billion in December, down $594 million, or 20.4%, from the same month of last year. It was the fifth consecutive month of decline in exports.
Imports grew 2% to over $6 billion in December. It was the sixth consecutive month when imports stayed above $5 billion and for the first time crossed $6 billion in the current fiscal year. In absolute terms, imports increased $118 million last month.
As a result, the trade deficit widened one-fourth to $3.7 billion, up $712 million. On a month-on-month basis, the trade deficit also increased 28% due to the reduction in exports and the double-digit increase in imports.
As exporters were already struggling to remain globally competitive, they faced yet another challenge at the hands of the Federal Board of Revenue (FBR). The tax machinery has directed its field formations to pick at least 70 exporters for scrutiny of their income tax returns.
The FBR stated that an analysis carried out at its headquarters revealed that a significant number of exporters, associations of persons and companies substantially reduced their declared taxable income for tax year 2025 after the taxation regime for export proceeds was modified from the final tax to the minimum tax, according to the FBR's instructions.
These instructions showed that all field formations were directed to closely examine the declarations of major exporters falling within their respective jurisdictions to ascertain whether there was any abnormal reduction, inconsistency or change in declaration patterns after the amendment.
However, Pakistan Retail Business Council Chairman Ziad Bashir complained to the prime minister about the FBR's action. "At a time when Pakistan's export sector is already under stress owing to some of the highest effective tax burdens, energy tariffs, interest rates and financing costs in the region, the issuance of such broad, open-ended scrutiny instructions sends a deeply troubling signal to the business community," Ziad wrote to the PM.
The FBR was forced to give a public explanation after the hue and cry made by the exporters. In a press statement issued on Thursday, the FBR said "in order to mitigate the possibility of any bonafide or other errors, the field formations were directed to pursue the returns and process them in accordance with the law, wherever any legal inconsistency is identified."
Conducting desk audits of returns and ensuring compliance with tax laws is the statutory and primary responsibility of the FBR, it added. The FBR said that to prevent any inconsistency, misuse or undue inconvenience to taxpayers, this exercise has been initiated under the supervision of the FBR headquarters.
