SOME PRICE AND NON-PRICE FACTORS AFFECTING IMPORTS IN PAKISTAN

Introduction

Pakistan is observing a chronic trade deficit since many decades. To reduce the trade deficit, researchers and policy makers generally think about increasing exports and thus determinants of exports are frequently examined. However, these deteminnats are investigated infrequentlty. But as Pakistan adopted the trade liberlaization regime therefore both the imports and exports have increased. The evidence for adopting trade liberalization regime is that even average tariff rate was 40.7 per cent to 25.5 per cent during 1987-88 to 1996-97 [Siddique and Iqbal (2001)]; which dropped to around 8 per cent in 2006-07 [Hussain (2008)]. Therefore, against this backdrop of libearlization, the reduction of trade deficit may not be easy, especially, in the phase of development where imports are necessary to expedite the manufacturing and other sectors of the economy.

It is interesting to note that despite the low growth in imports, as compared to exports the trade account remained in deficit from 1980 to 2013. For example, during the decade of 1980s the average annual growth rate of real imports and exports as share of real GDP, were witnessed to be 5.04 per cent (negative) and 3.56 percent (positive), respectively; whereas in the decade of 1990s the average annual growth rate of real imports as share of real GDP followed an upward trend and moved to almost 1.32 per cent (negative) but, after following the decreasing trend the export share reached to almost 0.37 per cent (negative). Besides, in the decade of 1990s an averange annual growth rate of real imports as share of real GDP increased to almost 0.46 per cent (positive), during the period from 2000 to 2009. Following the increasing trend an average annual growth rate of real exports as share of real GDP turned to be almost 3.19 per cent (positive) during the same period. However, during the period from 2010 to 2013 the average annual growth rate of real imports as percentage of real GDP moved to almost 3.86 per cent (negative), whereas, the average annual growth rate of real exports as share of real GDP was almost witnessed as almost 0.19 per cent (positive).

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