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Pakistan's Exports Plummet 20.4%, Deepening Economic Crisis

Pakistan's exports contracted sharply by 20.4% in December, continuing a five-month decline that points to deep structural economic issues. The trade deficit surged 25% to $3.7bn as imports revived faster than expected, crossing the $6bn mark. This widening gap threatens external sector stability and forces policymakers to suppress growth to avoid a balance-of-payments crisis. Reliance on remittances and central bank intervention to finance the deficit leaves the economy vulnerable to external shocks.

Key Points: Pakistan's Export Crisis Deepens with 20.4% December Drop

  • Exports fell 20.4% in December
  • Trade deficit widened 25% to $3.7bn
  • Imports crossed $6bn mark
  • Structural factors drive crisis, not temporary setback
2 min read

Pakistan's economic crisis deepens as exports shrink

Pakistan's exports fell 20.4% in December, marking a fifth month of decline and widening the trade deficit to $3.7bn, signaling a structural economic crisis.

"The slump stems from structural factors and can no longer be dismissed as a temporary setback. - Dawn"

New Delhi, Jan 6

A sharp fall of 20.4 per cent in Pakistan's exports in December -- the fifth consecutive month of declining overseas shipments of the country -- underscores that the slump stems from structural factors and can no longer be dismissed as a temporary setback, according to an article in the local media.

The article in the Dawn observed that Pakistan's poor export performance has always remained the weakest link in its external sector stability chain. This has become even more pronounced in recent years amid drying foreign official and private fund flows, which successive governments used to prop up the feeble balance-of-payments position.

The sustained export contraction heightens the risks to the nation's external sector recovery as growing imports threaten to erode the gains achieved through demand compression over the past two years, the article said.

Imports crossing the $6bn mark last month for the first time during the current fiscal year signal that a policy shift towards trade normalisation and liberalisation has revived import demand faster than anticipated, the report pointed out.

In absolute terms, the $118m boost in imports is quite modest given the country's size and consumption trends. But when juxtaposed with the sharp contraction in exports, it pushes the monthly trade deficit up by 25pc to $3.7bn. The six-month cumulative picture of trade imbalance is even more worrisome. The $19.2bn trade deficit posted in the July-December period is 35 per cent higher than last year, the article further stated.

The State Bank may use strong remittances and its dollar purchases to finance the trade gap and boost reserves for as long as it can. But reliance on this strategy to offset a structurally widening trade gap has its own risks as it leaves the external account vulnerable to geopolitical shocks and host-country labour market changes.

Moreover, sustained intervention to build reserves tightens domestic liquidity and fuels exchange rate pressures. The deteriorating export performance is not a threat only for external sector stability; it also forces policymakers to suppress growth to ward off yet another balance-of-payments crisis. If anything, the latest trade numbers expose a disconnect between stabilisation and sustainability, the article added.

- IANS

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Reader Comments

P
Priya S
Very detailed analysis. The part about suppressing growth to avoid a BoP crisis is so true. It creates a vicious cycle of low investment, low productivity, and then low exports again. Their focus needs to shift from stability to sustainable growth, but that requires political will they seem to lack.
R
Rohit P
From an Indian business perspective, a stable neighbour is always better for trade and regional prosperity. But their internal issues are so deep-rooted. Hope they find a way out, for the sake of the people suffering inflation and job losses. 🙏
S
Sarah B
The article mentions "geopolitical shocks" – that's a key point. Their economy is far too vulnerable to external pressures. Building reserves by tightening domestic liquidity is just a short-term fix that hurts their own citizens. A sad situation all around.
V
Vikram M
The export numbers are shocking but not surprising. When you don't invest in R&D, infrastructure, and ease of doing business, this is the result. India faced similar challenges but course-corrected in time. They need to look inward for solutions, not just to the IMF.
K
Kavya N
My heart goes out to the ordinary Pakistanis. Economic mismanagement at the top always hits the middle class and poor the hardest. The trade deficit widening by 35% is a huge red flag. Hope their leaders prioritize economic diplomacy and stability now.

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