Global trade finance gap hits record $2.5tr

ISLAMABAD: The global trade finance gap grew to a record $2.5 trillion in 2022 from $1.7tr two years earlier, as rising interest rates, flagging economic prospects, inflation, and geopolitical volatility reduced the capacity of banks to deliver trade financing, according to a report released by the Asian Development Bank (ADB) on Tuesday.

The “2023 Trade Finance Gaps, Growth and Jobs Survey” says the trade finance gap is the difference between requests and approvals for financing to support imports and exports. Rebounding strongly after the Covid-19 pandemic, global goods exports grew in 2021 and 2022 at 26.6 per cent and 11.5pc, respectively.

Demand for trade finance surged on the back of this sharp recovery but heightened economic risks made finance more difficult to secure than before, the survey indicates. Following a zero-growth rate during the last quarter of 2022, as of April 2023, global trade exports in value slowed year-to-date, showing a decline of around 3pc.

The survey is the world’s leading barometer of trade finance health.

It includes data from 137 banks and 185 companies from around 50 countries. Respondents said they faced continued constraints in 2022 due to rising interest rates and financial market uncertainties, set against the backdrop of a global economic slowdown, and geopolitical instability.

“The global trade finance funding gap has now widened to well over $2tr, as the global economy still struggles to rebound from the pandemic,” said ADB’s Director General for Private Sector Operations Suzanne Gaboury.