Trade Deficit

Trade deficit is a situation where country’s imports of goods and services exceeds its exports
of goods and services. (Tamplin, 2023)
Country’s spending on imports is greater than its income from exports.
Effects of Trade Deficit
 Unemployment
 Foreign debt accumulation
 Decreased economic growth.
 Decreased foreign reserves.
 Inflation
Trade Deficit in Pakistan
The trade balance plays a pivotal role in shaping macroeconomic policies, offering valuable
insights into economic behaviour and policy decision-making. In Pakistan, trade deficits have
been present since the fiscal year 1955 and have continued up to the present time. Pakistan
maintains a trade deficit due to high imports of energy products including fuel, machinery
equipment and chemicals. (Dr.Naeem Zafar, 2023)
The Country’s trade deficit during year 2020-21 stood at $31.076 billion against the deficit of
$23.159 billion during the year 2019-2020 due to increase in imports. (Mr Muhammad
Idrees, 2021)
The Country’s trade deficit during year 2021-22 estimated at $48.3 billion. Pakistan’s trade
deficit grew by 55.6% despite expansion of exports by 25.5% but outpaced by 42.1% of
imports. The increase in commodities prices in global economy due to post covid-19 situation
and Russia Ukraine conflict slowdown the world economic growth, widened the trade deficit
of many emerging economies and energy importing countries. ( Muhammad Memon, 2022)
Moreover, Pakistan has successfully contracted its trade deficit by 43.2 percent, reaching
$27.474 billion in 2023 from $48.355 billion during year 222.Government’s control over
imports contributed significantly to achieving this target. (Dr.Naeem Zafar, 2023)
Currently, Pakistan’s trade deficit widened by 180.58% year on year basis, and stood at
$2.374 billion in April 2024 compared to $846 million during the same month of 2023.As,
the imports surged by 58.43% over the year and stood at $4.723 billion in April 2024
compared to $2.981 billion in April 2023.

So, Pakistan's trade deficit has been a persistent concern, fluctuating due to various factors
such as high imports of energy products, global economic conditions, and government policy
interventions.