The Pakistan Cabinet on Tuesday ruled out any imports from India and instead decided to look to China to meet its domestic requirements.
Cash-strapped Pakistan is currently struggling to emerge from an economic crisis, with support from the International Monetary Fund (IMF) and Saudi Arabia.
On Tuesday, the Pakistan cabinet met to discuss relaxing its trade ban with New Delhi to import essential produce like tomatoes and onions that have recently risen sharply in price.
But the federal cabinet, presided over by Prime Minister Imran Khan, was unanimous in its decision to not trade with India and to instead look to China.
Pakistan previously suspended the import of Indian goods under the Afghanistan–Pakistan Transit Trade Agreement (APTTA), a bilateral trade agreement signed by Pakistan and Afghanistan in 2010 that calls for increased free movement of goods.
In August, Islamabad issued two separate federal cabinet notifications aimed at suspending bilateral trade with India until further notice. All exports to India were also suspended by amending the government’s Export Policy Order 2016.
Pakistan is keen to improve its balance of payments position and in 2018-19, external deficits reduced. The country’s current account and trade deficits fell by $6.3 billion (31.6 percent) and $5.76 billion (15.3 percent) respectively in this period, and this contraction has continued into 2019-20.
In the first quarter (July-September 2019),the trade imbalance came down to $5.7 billion compared with $8.7 billion in the corresponding period in 2018-19. The current account deficit narrowed down to $2.7 billion year-on-year.
In 2019-20 (July-September), imports declined by 20.6 percent while exports registered a mere 2.7 percent growth.
Statistics indicated that in 2019-20, Pakistan is expected to end up with $23.6 billion in exports, $43.5 billion in imports and a subsequent trade deficit of $20 billion.
Pakistan essentially produces primary products such as wheat, cotton, sugarcane and rice, and low value-added products such as textiles, sugar and leather articles. The country is an agro-based economy but still, it is a net food-importer. It has only a small manufacturing base.