EUR 4.64 For Business Accounts Only

Intermarket Pulse: Pakistan Economy: Trade deficit sharply widens; remedial measures needed

• Pakistan’s trade deficit in Feb’17 clocked in at US$2.8bn, up 88%YoY, taking 8MFY17 total to US$20.2bn (up 34%YoY). Decline in exports is intensifying (down 8%YoY in Feb’17); meanwhile, uptick in Machinery, Autos and Food imports has overshadowed the savings from low oil prices. Imports were up 36%YoY in Feb’17.

• Remittances in Feb’17 stood at US$1.4bn, down 7%YoY. Major drag came in primarily from flows from Saudi Arabia (down 15%YoY), potentially reflecting the recent deportation of around 40,000 Pakistani workers.

• Total Fx reserves are down US$2bn from all-time high of US$24bn recorded in Oct’16. Recent moves from GoP and SBP, including imposition of 100% cash margin on imported consumer items, possible restriction on bulk overseas traveling of bank employees, and talks with two Chinese commercial banks to lend US$600mn as a quick fix to BoP problem, are clearly indicating growing concerns on the external front.