ISLAMABAD; Advisor to Prime Minister on Finance and Revenue Shaukat Tarin moved to pacify the public, saying that the country's economy is moving in the right direction and the widening trade gap would narrow in the coming months, a statement that comes after Pakistan reported a historic high import bill in November.
The high import bill was accompanied by a record level of exports as well. However, the far-greater increase in imports led to the widening of the trade deficit.
The development, along with expectations of a further increase in interest rate in coming months, led the stock market to endure its worst falls on Thursday. The KSE-100 Index was down 4.7% on Thursday, its lowest daily decrease since the pandemic-driven sell-off in March 2020.
Speaking to the media on Friday alongside Adviser to Prime Minister on Commerce Abdul Razak Dawood, Tarin said the public needs to be patient, adding that there is hope that international commodity prices will come down, which would reduce the import bill.
“Economic indicators are moving in the right direction,” said Tarin.
Talking about fundamentals, the advisor said that the tax revenue has increased by 36% year-on-year, a development he said points to a growing economy.
“The revenue is growing, electricity consumption has increased, and agricultural output has also improved,” he said. “What we need to see is that all the economic indicators are moving in the right direction. This is a temporary phenomenon (spike in global prices), which is prevalent across the globe including India, US, and UK. We too, will get out of it.”
Referring to the Pakistan Stock Exchange's (PSX) sell-off the previous day, the advisor said that the media gives "more coverage to negative developments".
“We need to be a little patient, commodity prices in the international market will decline soon.”
Meanwhile, talking about inflation that hit a 21-month high at 11.5% in November, Tarin called it 'imported inflation'.
Tarin said that the positive development is that Pakistan’s exports are increasing, and “hopefully, our remittances and exports together would shrink our trade gap”.
Speaking on the hike in commodity prices, the advisor said that the government is seeing a return of stability in coal and oil prices.
Dawood, the advisor on commerce, said Pakistan's high import bill was mainly on account of energy and raw-materials.
“The import hike was led by energy imports that increased by $500 million on a monthly basis, the import of raw materials recorded a jump of $252 million in November,” said the advisor, who was of the view that the increase in raw material import is ‘good’ as it indicates economic growth.
He added that the machinery import also grew by $165 million during the month, “which is also a good sign, as it indicates industrial expansion”.
‘"I believe there is nothing to be worried about," Dawood said on a lighter note.
“The decrease in oil prices also shows that the trend is on the decline, and I am hopeful that the pressure on imports would reduce next month,” advisor said, adding that he is confident Pakistan's exports would also hit $3 billion during the month of December, which would reduce the trade deficit.
The advisor informed that the government has also developed a strategy to enhance rice exports by $200-300 million.
This article was first published in Business Recorder on Dec 3, 2021.