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The trade deficit for November 2019 improved 30 percent year-on-year – keeping up with the trend started since the beginning of FY20. The November trade deficit was under $2 billion, only the second time in over three years. The improvement in trade deficit in 5MFY20 terms is equally impressive – lower by 33 percent year-on-year.

The story on both imports and exports front has not changed from where it started in July 2019. The export growth is steady and in single digits, while the import decline is well in double digits. Imports in 5MFY20 have come down by 18 percent year-on-year, led by food, and machinery groups, whereas the drop in transport group imports is also getting deeper by the day.

The detailed numbers will be out next week, but the sub $4 billion monthly import shows the trend in food, transport and machinery imports has not started to reverse. The petroleum group imports have remained sticky for some time, as global crude prices have remained range bound.

The uptick in economic activity at home, may only gradually pick up. Any increase in imports toy yesteryear level would be welcome, if it goes along with a sizeable increase in exports. The exports have not performed too badly either, especially in volume terms, where record highs have been made month-after-month. That said, even the best of efforts would not suddenly result in a double digits increase in export values, in a scenario, where global demand is struggling to pick up.

The second d half of FY20 may not be as smooth sailing as the 1H in terms of import compression. Pakistan is certainly looking at a multiyear low cotton production, and by some estimates, the cotton import could be twice the usual figure this time around, which could mean an additional $800-1000 million (read: watch out for cotton imports, published on December 11, 2019).

A potentially bigger crisis awaits in terms of imports, that of crude oil and petroleum products imports, as the local refineries are facing a not-so-distant scenario of shutdown. Should the unthinkable happen, add a few billion dollars more to the import bill (read: ‘Refineries - do or die’, published December 12, 2019). It has been smooth sailing thus far, but trickier times could well be ahead, and exports will have to do the bulk of improvement, if the surplus story is to stretch any further.