Quarterly Trade Bulletin FY 2011 (JANUARY – MARCH 2011)

The country's exports rose above $20 billion over a 10-month period in FY 2011, with an increase of 40.4 percent in comparison to the same period last year. The Trade Development Authority of Pakistan is taking steps to ensure that the $24 billion export target is achieved by the end of this financial year. In addition to export of commodities, services exports also witnessed a 55.7 percent increase during the first seven months of the current financial year as compared to the same period in the last year. The services that played a major part in pushing up exports include transportation, travel, communication, construction, insurance, and information technology. The State Bank of Pakistan has predicted that inflation for the current financial year 2011 ending June 30 will be around 14.5-15.5 percent. The government aims to keep the fiscal deficit below 5.5 percent of GDP in the current financial year and reduce it to 4.5 percent of the GDP in the next financial year. In the period under review, the country's current account deficit decreased significantly, owing to impressive growth of exports and limited increase in imports. According to the latest revised GDP growth rate forecasts by the State Bank of Pakistan, provisional figures for FY2011 (July-June) are now forecasted to be about 2.4 percent, which is even lower than the previously downgraded GDP growth rate of 2.8 percent. The initial GDP growth rate target for FY2011 (July-June) was 4.5 percent, which was later revised to 2.8 percent in the wake of last year's devastating floods. Pakistan's average foreign exchange reserves for FY2011 (Jan-Mar) were 18.6 percent higher than those recorded in the same period of the last financial year. The country's foreign exchange reserves hit an all-time high of $18.0 billion during the week that ended March 26, 2011. Factors responsible for pushing the country's foreign exchange reserves up include the release of funds under the International Monetary Fund's (IMF) loan program, growing remittances sent home by overseas Pakistanis, and the release of over $633 million under the Coalition Support Fund in January by the US government for Pakistan's battle against terrorism. Inflation for the period under review (FY2011 Jan-Mar) stood at 13.2 percent; slightly lower in comparison to 13.4 percent in the same period last year. While inflation still remains high, it has fallen from its peak in the latter half of 2010. However, it does not seem that it will be easy for the government to contain inflation in the country, especially at a time when the government increased prices of petroleum products in the range of 4.8-11.8 percent on 1st May 2011. The country's current account deficit decreased significantly in the period under review, owing to impressive growth of exports and limited increase in imports. The deficit decreased from -2.40 percent of GDP in FY2010 (Jan-Mar) to -1.66 percent of GDP in FY2011 (Jan-Mar). The country's average foreign exchange reserves for FY2011 (Jan-Mar) were 18.6 percent higher than those recorded in the same period of the last financial year. The government aims to keep the fiscal deficit below 5.5 percent of GDP in the current financial year and reduce it to 4.5 percent of the GDP in the next financial year. The government also aims to contain inflation in the country, which stood at 13.2 percent in the period under review. However, it does not seem that it will be easy for the government to contain inflation, especially at a time when the government increased prices of petroleum products in the range of 4.8-11.8 percent on 1st May 2011.