KURSHID AHMED | Published — Sunday 21 January 2018
Pakistan's trade deficit has risen sharply as it imports more goods for massive projects such as Gwadar Port. (Reuters)
KARACHI: Top economists have called for tough policy measures to curb Pakistan’s current account deficit that include new taxes on imports.
The deficit has reached $7.6 billion, or 4.4 percent of GDP, in the first half of the current financial year as imports soar.
That represents a 57 percent increase on last year’s deficit of $4.8 billion, data issued by State Bank of Pakistan (SBP) show.
Rising imports have also widened the trade deficit to $17.96 billion from $14.42 billion in the year-earlier period.
“The major import comprises machinery, petroleum products and chemicals which is primarily due to immense economic activity under the Chinese investment,” said Miftah Ismail, former adviser to the prime minister on finance.
Muzzamil Aslam, senior economist and CEO of EFG-Hermes Pakistan told Arab News:“We have not seen the level of production and exports as compared to the level of machinery imports. We need to increase our productivity and exportable surplus to tame the burgeoning CAD.”
Pakistan’s central bank expects the deficit to remain at 4 to 5 percent of GDP for the entire current financial year.
The current account deficit is an important measure of the health of an economy that has also been battered by the depletion of foreign exchange reserves that have piled further pressure on the already weakened rupee, said Ahmed.
“In the presence of such a huge CAD pile further devaluation of rupee would not be a prudent move as it will only increase the foreign debt stock,”he added.
Still, remittances received by Pakistanis were also higher amounting to $9.74 billion in first half of fiscal year 2017-18 from $9.5 billion a year earlier.
“The government needs to take steps to discourage imports of unnecessary products in order to limit the import bill. More goods should be subjected to regulatory duty apart from the most necessary goods,” said Hafeez Pasha, a senior economist and former adviser to the prime minister of Pakistan.
“Government should eliminate taxes imposed on energy inputs because a myriad of taxes has rendered the industry uncompetitive,” said Pasha