Pakistan’s services trade deficit narrowed 43 percent in the fiscal year 2021 due to lower international traveling following the COVID-19 pandemic.
According to the State Bank of Pakistan (SBP), the service trade deficit was $ 1.875 billion in the fiscal year 2021, down from $ 3.316 billion in 2020. The narrowing trade deficit in services helped curb the current account deficit, which fell 58 percent to $ 1.85 billion last fiscal year.
The improvement in services Trade came at the expense of lower Services import which fell down by 11 percent and higher services exports which increased by 9.19 percent in July-June for the fiscal year 2021.
Detailed analysis showed that exports of services increased by $ 500 million to $ 5.937 billion over the period under review, while Services Imports totaled $ 7.812 billion, down $ 941 million from last year.
The huge drop in services deficit is mainly attributable to lower imports, which fall into two categories related to international air travel, and which have been severely affected by the Covid-19 pandemic.
The significant reduction in import charges for air transport services is a major factor in the overall improvement in the quality of services. Air Travel payments fell 33 percent to $ 825 million in FY2021.
Another category in which payments have dropped is financial services, which are primarily needed by Pakistanis when traveling internationally. Financial services fees fell from $ 468 million in fiscal 2020 to $ 185 million in the fiscal year 2021. In addition, import freight charges have dropped slightly from $ 87 million to $ 2.949 billion in the fiscal year 2021.
In terms of services exports, net sales of the Technology sector rose by 47 percent to $ 2.123 billion in the fiscal year 2021, up from $ 1.440 billion last year.
Companies providing IT services in the country have taken full advantage of the explosive growth in demand for IT services in the global market due to the Covid-19 pandemic. However, the incentive for ICT exports has been largely offset by weak revenues in other service sectors, including domestic shipping companies. Other significant exports of trade in services amounted to the US $ 1.421 billion in other business services and the US $ 1.037 billion in government services.
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