Quarterly Trade Bulletin Fiscal Year 2012, Quarter 3 (January - March)

The project aimed to improve Pakistan's overall trade environment through improved regulations, policies, systems, and capacity. Additionally, it sought to increase cross-border trade with Pakistan's neighbors, especially with Afghanistan, and support the implementation of sustainable and competitive Special Economic Zones (SEZs) and the Reconstruction Opportunity Zones (ROZs) program. Pakistan's economy continues to face economic challenges, with a trade deficit of over USD $16 billion for the first nine months of the ongoing fiscal year FY 2012. Exports fell by 3.03 percent to USD $17.190 billion in FY 2012 (July-March), from USD $17.727 billion in the same period last year. The Trade Development Authority of Pakistan (TDAP) expects the ongoing fiscal year's 2012 (July-June) exports to be around USD $23 billion. The depreciation of the Pakistani Rupee (PKR), rising oil prices in the global market, and the decline in prices of textile commodities have been highlighted as the primary reasons behind the rising deficit. Imports of several commodities, including fertilizer and food products, also contributed to the rising deficit. The amount paid for external debt servicing by the country increased, with debt servicing for the period FY 2012 (Jan-March) standing at USD $912 million. The country made payments worth USD $452 million to the International Monetary Fund (IMF) in this period. Due to these debt payments, the country's foreign exchange reserves, after crossing the USD $18 million mark in last July, are declining. The value of the PKR is also consistently depreciating against major foreign currencies, including the US dollar, in the past twelve months. Remittances sent home by overseas Pakistanis continued to increase, rising by 25.17 percent in the period under review compared to the same period last year. The Pakistan Remittance Initiative (PRI) aims to reduce impediments to send remittances to the country, continues to be highlighted by the State Bank of Pakistan (SBP) as playing an important role in increasing workers' remittances. Inflation levels in this period were lower than the prior year, with average Consumer Price Index (CPI) inflation for FY 2012 (Jan-Mar) standing at 10.65 percent, compared to 13.42 percent observed in FY2011 (Jan-Mar). The SBP predicts that due to inflationary pressures, the CPI may not decline to single-digit levels in the next fiscal year FY 2013 (July-June). The State Bank of Pakistan (SBP) maintains a 12 percent interest rate since October 2011, and did not resort to any further cuts in the period under review due to the overall macroeconomic conditions in the country. The SBP recently increased the minimum savings rate on bank savings accounts from 5 to 6 percent. Pakistan's trade deficit continues to widen, with exports declining by 13.31 percent in the period under review over last year. Imports, however, surged by 7.06 percent. The decrease in textile exports, attributed to the ongoing energy crisis and decline in prices of textile commodities in the international market, contributed towards this decline.