EUR 4.54 For Business Accounts Only

Pakistan Economy: Trade deficit widens 22%YoY in 1HFY17

​Pakistan’s trade deficit during Dec’16 clocked in at US$2.8bn, up 35%YoY (1HFY17: US$14.5bn; up 22%YoY), with exports continuing to remain under pressure (down 3%YoY to US$1.7bn in Dec’16). Meanwhile, imports are on the rise (up 18%YoY in Dec’16), driven majorly by an uptick in Food, Autos & Machinery related imports.

Slowdown in remittances has remained contained in 1HFY17 (US$9.46bn; down 2%YoY), particularly after plunging 20%YoY in Jul’16 on account of timing difference of Eid/Ramadan flows. Regulatory tightening in the US, and depreciation of the GBP against US$ (translation effect in case of flows from UK) has kept headline growth in check.

PkR continues to hold its ground against the US$ this year, courtesy all-time high Fx reserves (US$23bn), despite lackluster trade and remittance performance. We flag no immediate threat to the currency, with rise in external debt related flows to limit impact of weakening trade balances. CA deficit is expected to be 2.2% of GDP in FY17F.