By Jawad Ahmed ISLAMABAD, Feb. 10 (INP-WealthPK): Despite Pakistan’s rising exports, imports are growing at an even faster pace, resulting in a greater trade deficit. Trade deficit soared to $25.5 billion in the first half of the fiscal year 2021-22, up from $15 billion in the same period in FY20-21. According to the State Bank of Pakistan (SBP) data, this was attributable to a 56% rise in imports against a 29% growth in total exports during the July-December period of FY21-22. The World Bank says Pakistan needs to establish long-term strategies with the aid of the federal, provincial governments, and civil society to boost exports on priority basis. Remittances have played primarily a critical part in supporting Pakistan's overall economy and balance of payments (BoP). Over the last few years, a sustained increase in remittances inflows has provided some cushion to offset the overall negative impact of the trade imbalance. These inflows increased by 27 percent in FY21 to $29.4 billion, narrowing the total current account deficit from -1.7 percent in FY20 to -0.6 percent in FY21. Remittance inflows increased by 11.3% in the first half of the current fiscal year. During this period, remittances increased to $15.8 billion from $14.2 billion compared to the previous year (July-December). However, it is not the most effective long-term strategy for achieving economic stability. Pakistan's current account deficit topped $9 billion in the first half of the current fiscal year (July-December). According to the SBP data seen by WealthPK, the trade deficit, increased 106% to $25.5 billion in July-December FY2022. To improve trade balance and narrow down the deficit, the SBP added 114 non-essential (luxury) items into the list, all of which require a 100 percent cash margin. Furthermore, the Ministry of Finance also increased regulatory tariffs on imports of luxury goods. According to the World Bank report “Pakistan Development Update: Reviving Exports”, these efforts are not helping to lower the trade imbalance for three reasons. Firstly, the share of these import commodities in the current account is too small to have an significant impact on the trade balance. Secondly, the demand for these items is relatively inelastic, therefore raising the tariffs will have no influence on the demand for these goods. Thirdly, to produce substitute of these items in the domestic market is more expensive and requires imports of its spare parts from other countries. Rather than accomplishing the desired objective, these measures can worsen Pakistan's trade balance. Pakistan's chronic and substantial trade imbalance is a result of the country's export non-competitiveness. Firms' export market share has decreased since 2000, especially in the previous decade. Since 1999, the share of exports in gross domestic product (GDP) has decreased from 16 percent to 10 percent by 2020. As a result, the country's exchange rate, productivity, and employment possibilities have all suffered, WealthPK reported. According to the World Bank report, there are numerous hurdles to reviving exports, but three of them are the most critical elements. First, due to high protection policies, Pakistani industrialists prefer to sell their products in the domestic market rather than exporting them to other countries because of the natural advantages of low transportation costs, perfect market knowledge, and consumer preference.  Furthermore, limited access to the international market is also a reason for a stagnate growth in exports. In recent decades, preferential trade agreements (PTAs) have become a common tactic for countries seeking market access and regional and global integration. Indeed, the global number of PTAs has increased from 50 in the early 1990s to around 300 in 2019. Pakistan is a signatory of four PTAs, but China-Pakistan Free Trade Agreement (CPFTA) is the only agreement that is working effectively and contributing significant share to exports. Lastly, low productivity makes it difficult for local firms to compete successfully in global marketplaces. Increasing productivity is the major requisite to gin foothold in global market. To sum up, Pakistan requires a long-term strategy to improve its export competitiveness in the global market. This can be accomplished by putting up comprehensive long-term policies for reforms that include both federal and provincial authorities, as well as the public and private sectors.