Pakistan trade gap at lowest in two years but not for long

Pakistan’s trade deficit has dropped to its lowest point in almost two years, though analysts expect that the gap will soon widen.

The nation’s trade deficit narrowed by 42% to $2.27 billion, according to Pakistan Bureau of Statistics data released late Wednesday. After the government controlled purchases because of a dollar shortage, imports dropped by 27% to $4.64 billion, the most since the start of the pandemic.

“There has been a control on various things, including anything that can stop the outflows of the dollar,” said Amreen Soorani, head of research at JS Global Capital in Karachi. “Things obviously will eventually normalize. We cannot sustain this way.”

The South Asian nation is looking to recover from catastrophic floods earlier this year that led Moody’s Investors Service to downgrade the nation deeper into junk on concerns about debt payments. The nation’s foreign exchange reserves are at their lowest level in three years. 

Pakistan has restricted imports to control a dollar shortage. Local units of Suzuki Motor Corp and Honda Motor Co Ltd shut manufacturing multiple times over the past few months after the authorities restricted imports of parts.

From this month, the government of Prime Minister Shehbaz Sharif has decided to clear pending import payments between $50,000 to $100,000 from below $50,000 to increase the import bill.