Quarterly Trade Bulletin: 2nd Quarter, Fiscal Year 2012 (October – December)

This represents a significant increase from the trade deficit of $8.29 billion recorded for the same period in FY 2011. The rising trade deficit can be attributed to rising prices of various commodities such as oil in the international market, coupled with a weakening rupee. The Pakistani rupee has recently been losing its value against major foreign currencies and hit record lows against the US dollar. Factors responsible for the devaluation include a growing import bill, reduced inflow of funds from external financial institutions such as the IMF, and declining FDI repayments of IMF loans expected in 2012. Although the Trade Policy 2011-12 envisages an export target of $26 billion for the country, recent estimates by TDAP (Trade Development Authority of Pakistan) forecast that the country will not be able to reach this target, and exports for FY2012 may end up being lower than the $25 billion figure recorded in the previous fiscal year. The country's fiscal deficit for the first six months of FY 2012 was 2.6 percent of GDP, according to the Ministry of Finance. This represents a decrease from the fiscal deficit of 2.9 percent recorded for the same period last year. However, the forecasted fiscal deficit for FY2012 is now expected to be around 4.7 percent, higher than previous estimates. The figure has been revised on account of growing government expenditures. Average foreign exchange reserves of the country in FY2012 (Oct-Dec) were slightly higher than last year. The country's foreign exchange reserves reached record highs exceeding $18 billion in late July FY2012 but have since gradually declined due to debt payments. Repayment of funds borrowed from IMF, which is set to begin in February 2012, is expected to bring down foreign exchange reserves in the future. However, some respite to this pressure is likely to be come in the form of higher remittances in the ongoing fiscal year. Remittances sent home by overseas Pakistanis continue to witness a growing trend, with proceeds in FY2012 (Oct-Dec) 14.34 percent higher than last year, despite the ongoing global economic slowdown. The Pakistan Remittance Initiative (PRI), aimed at reducing impediments to send remittances to the country, is also credited with playing a role in increasing workers' remittances. Foreign reserves of the country can possibly receive a boost if the country is able to attract higher foreign investment and reduce its trade deficit. The country's macroeconomic outlook remains challenging, with a growing trade deficit, a weakening rupee, and a high fiscal deficit. However, the government's efforts to attract higher remittances and reduce impediments to trade are expected to provide some respite to the pressure on the country's foreign exchange reserves. The country's economic growth rate is expected to be around 3.8 percent in FY2012, according to estimates by the Ministry of Finance. The country's trade environment is expected to remain challenging in the coming months, with a growing trade deficit and a weakening rupee. However, the government's efforts to attract higher remittances and reduce impediments to trade are expected to provide some respite to the pressure on the country's foreign exchange reserves. The country's economic growth rate is expected to be around 3.8 percent in FY2012, according to estimates by the Ministry of Finance. The country's foreign exchange reserves are expected to remain under pressure in the coming months due to debt payments and declining FDI repayments of IMF loans. However, some respite to this pressure is likely to be come in the form of higher remittances in the ongoing fiscal year. The country's remittances sent home by overseas Pakistanis continue to witness a growing trend, with proceeds in FY2012 (Oct-Dec) 14.34 percent higher than last year, despite the ongoing global economic slowdown. The country's economic growth rate is expected to be around 3.8 percent in FY2012, according to estimates by the Ministry of Finance. The country's fiscal deficit for the first six months of FY 2012 was 2.6 percent of GDP, according to the Ministry of Finance. This represents a decrease from the fiscal deficit of 2.9 percent recorded for the same period last year. However, the forecasted fiscal deficit for FY2012 is now expected to be around 4.7 percent, higher than previous estimates.