Whither the Economic Agenda?

One of the biggest factors that keeps the pressure on the balance of payments in Pakistan is the burgeoning trade deficit. Higher economic growth rates, which were reported in the previous fiscal year, are often accompanied by growth in consumption. Further, the demand for imported fuel also increases to satiate the needs of the growing economy. As imports increase but exports remain stagnant with fewer avenues for sustainable inflows of dollars, the alarm bells ring as the country faces a balance of payment crisis. According to the trade statistics provided by the Pakistan Bureau of Statistics, imports have declined by 27.21% year-on-year in October 2022, while exports declined by 3.7%. and the trade deficit declined by 42%. Although, the decline in trade deficit can be considered crucial to avert, it also indicates the fall in demand. The total value of imports in April 2022 for petroleum products was 1.6 million metric tonnes worth $1.3 billion. This declined in September 2022 to 1 million metric tonnes, worth $730 million. Lower global oil prices and lower demand due to the increase in regulatory prices at the local petrol pumps decreased the total value of imports of petroleum products. Further, the machinery group and transport group have also observed a significant decline in imports. This is disconcerting, given the fact that imports of productive machinery can help boost production in the economy. However, import controls that were imposed as a measure to alleviate the balance of payment crisis have created several challenges for domestic producers who are reliant on the imports of unfinished goods and capital goods to produce their output. Such measures result in not only higher prices of goods in the economy but can lead to shortage of critical products. The recent shortage of medicines is just one example.