ISLAMABAD: The increased construction and commercial activities in the country due to China-Pakistan Economic Corridor (CPEC) has largely contributed in widening the trade deficit. In the financial year 2015-16, Pakistan recorded trade deficit of $ 23.96 billion as compared to $22.1 billion during the last financial year, reflecting an increase of 8.42%.
According to a study conducted by the Ministry of Commerce (MoC), a number of factors had contributed to some extent in enhancing the trade deficit. Imports have grown by nearly 6% mainly owing to demand of many imported items is inelastic e.g. petroleum products, food items and machinery.
“Due to the increase in development activity in the country especially CPEC the import of machinery and equipment has increased as well as due to the shortfall in cotton production in the country, larger quantities of raw cotton are being imported from abroad to meet the demand of the textile industry.
The study revealed that the trade balance had also been affected due to decline in exports for a number of reasons including the economic slowdown in the global market, global commodity crisis as well as the currency devaluation by competitors Pakistan’s low position in global competitiveness index.
The study estimated that CPEC related imports could reach 11% of total projected imports by 2020, equal to just over $5.7 billion, while inflows under the corridor would touch 2.2% of projected GDP in that year.
Gross external financing needs of the country will jump almost 60% by then, from a projected $11billion for the current fiscal year, to $17.5 billion 2020. Similarly, country will see $27.8 billion in early harvest projects under CPEC in the next few years, with the remaining $16 billion coming over a longer timeline stretching out to 2030.
To cope with the challenge the country will need to manage increasing CPEC-related outflows by Chinese investors as amounts involved may add up to a significant level given the magnitude of the FDI” the source said.
