Trade deficit widens after racing imports

Trade deficit more than doubled in the first seven months of the fiscal year from a year ago on the back of high import growth.

At the end of January, the trade deficit stood at $5.72 billion, up from $2.79 billion recorded a year ago, according to central bank statistics.

During the period, imports soared 16.43 percent, while exports crept up 2.07 percent.

However, capital machinery imports, a barometer for investment activities brewing in a country, accounted for a major portion of the import growth between July last year and January this year, suggesting investment is finally picking up.

The import of capital machinery shot up 24 percent year-on-year in the first seven months of fiscal 2014-15, the highest among all sectors, according to letters of credit settlement statistics.

However, the political unrest, which set off in the first week of January, has resulted in an abrupt drop in imports, which will go on to ease pressure on trade balance.

The central bank yesterday released the data on January's LC openings and settlement, which showed that imports dropped 7 percent year-on-year in January and in the first two weeks of February, it declined 6.94 percent.

Meanwhile, the overall balance at the end of the first seven months of the fiscal year stood at $1.7 billion in the surplus, on the back of an increase in disbursement of foreign direct investment, medium- and long-term loans.

During the period, net FDI rose 5 percent to $850 million and medium- and long-term loans 12 percent to $1.4 billion.