Pakistan’s trade deficit expanded slightly to $5.4 billion in the first three months of the fiscal year 2024-25 (3MFY25), according to data released by the Pakistan Bureau of Statistics (PBS) on Tuesday. This represents a 4.2% increase compared to the $5.21 billion deficit recorded in the same period of the previous year.
During 3MFY25, exports saw a 14% rise, reaching $7.88 billion, compared to $6.90 billion in the corresponding period last year. However, imports also increased by nearly 10%, totaling $13.31 billion, up from $12.12 billion in 3MFY24.
September Trade Data
The monthly trade deficit grew by 20.35% year-on-year, reaching $1.78 billion in September 2024, compared to $1.48 billion in September 2023. This spike was driven by a sharp increase in imports, though exports also posted gains.
- Exports: $2.81 billion (+13.52% YoY)
- Imports: $4.59 billion (+16% YoY)
On a month-on-month basis, the trade deficit edged up by 1.9%, from $1.75 billion in August 2024 to $1.78 billion in September. Exports saw a slight increase of 1.6%, while imports rose by 1.7% over the same period.
Key Highlights:
- 3MFY25 Exports: $7.88 billion (+14%)
- 3MFY25 Imports: $13.31 billion (+10%)
- September 2024 Trade Deficit: $1.78 billion (+20.35% YoY)
Despite the rise in exports, the ongoing increase in imports has continued to exert pressure on the country’s trade balance, widening the deficit during the initial months of FY25.
WHAT IS TRADE DEFICIT?
A trade deficit occurs when a country’s imports exceed its exports over a specific period. In other words, it means that the country is buying more goods and services from abroad than it is selling to other countries. The trade deficit is a key component of the balance of trade, which is part of a nation’s overall balance of payments.
Key Points:
- Trade Deficit Formula:Trade Deficit=Total Imports−Total Exports
- If a country imports $300 billion worth of goods but only exports $200 billion, it has a trade deficit of $100 billion.
Implications of a Trade Deficit:
- Economic Growth: A trade deficit may indicate strong domestic demand for foreign goods, but prolonged deficits can raise concerns about the country’s economic health.
- Currency Value: A sustained trade deficit can lead to a depreciation of a country’s currency, as more of its currency flows out to pay for imports.
- Debt: A country running a large trade deficit may need to borrow funds from foreign lenders to finance the imbalance, leading to higher levels of national debt.
Countries with consistent trade deficits may look for ways to boost exports or reduce reliance on imports to balance their trade.
