The agony of Pakistan's current trade deficit under dim global growth.

Byline: Nazir Ahmed Shaikh

The year 2019 is proving to be a very hard for global growth which is projected to slowdown to 3.3 percent in 2019 from 3.6 in 2018. Global trade during 2018 remained slow on account of decelerated export orders and global manufacturing activity, particularly in capital goods. Leading global institutions and agencies including IMF and World Bank are continuously downgrading their global growth projections. Developed and developing economies are finding it hard to stay on the upward trajectory of growth.

Recession is silently cannibalizing the growth targets. Global output and investments are likely to be suppressed in 2019 due to uncertain business environment stemming from expected disorderly Brexit and US fiscal policy. Prices of metal and agricultural commodities also weakened due to concerns about fluctuation in trade and growth. However, if these differences are resolved without any further trade barriers and softener financial situation is observed then growth could be lifted up.

Pakistan is one of the lowest regionally-integrated countries in the world as the country's trade with its regional partners has remained paltry over the years. Pakistan's trade deficit plummeted by nearly 38% in the first two months of current fiscal year, driven majorly by a decline in the imports of non-essential luxury items amid exorbitant import duties. The macroeconomic indicators may have been an encouraging factor for economic pundits, however, the country is missing upon major trade potential within its region.

The desired improvement in imports and exports was partly achieved after the government implemented reforms under the 39-month IMF loan program, which started in July. The loan program binds the government to undertake structural reforms. These included increase in the key interest rate which stood at an eight-year high of 13.25% in July, depreciation of the rupee, which fell 32% to Rs160 to the US dollar in FY19, upward revision in power and gas tariffs and an ambitious tax-collection target of Rs5.55 trillion for the current fiscal year among other tough conditions for steering the economy out of the crisis.

Pakistan's exports have been conventional in nature and that most of its exports are destined to US, EU, the GCC and regional countries. Exports to China have increased over the years and as of 2018, China had overtaken UK as the second largest export destination for Pakistani export commodities.

Pakistan's...