KARACHI: Pakistan has recorded a much-awaited drop in the import of petroleum oil products in dollar terms for the first time in January since the beginning of current fiscal year in July 2018.
The decline came on the back of downturn in international crude oil prices, which provided a golden opportunity to the country to fix the faltering economy.
Over the previous months, almost all non-energy imports have slipped in dollar terms in the wake of measures taken by the government to narrow down the current account deficit – the difference between the government’s foreign expenditure (mainly import payments and debt repayment) and its income (mainly export proceeds and remittances).
The drop in energy imports is necessary to control the current account deficit and improve the balance of payments situation as the energy bill comprises around one-fourth of total imports of Pakistan.
Energy imports dropped 16% to $1.02 billion in January 2019 compared to $1.22 billion in the same month of last year, the Pakistan Bureau of Statistics (PBS) reported.
At the same time, the share of energy imports shrank to around 22% in total imports of $5.56 billion in January 2019 compared to average 27% share in total imports of $32.49 billion in first seven months (Jul-Jan) of FY19, according to the PBS.
Energy imports also include liquefied natural gas (LNG) and liquefied petroleum gas (LPG). The import value of LNG went down as its price was linked with the falling US Brent crude rate. LPG, however, showed an uptick in terms of both quantity and dollar value.
“A massive reduction in reliance on oil-based power plants and the shift to LNG-fired plants have played a leading role in pushing down the energy import bill,” said Arif Habib Limited Head of Research Samiullah Tariq while talking to The Express Tribune.
He said the import of crude oil had also slipped in recent months due to a slowdown in production at domestic oil refineries as heavy stocks of furnace oil at their reservoirs prevented them from producing co-products like petrol, diesel, jet fuel and kerosene.
“Though the economy is growing, the oil import bill has come down (which is a good omen),” he said. “The economy has not dropped. It has just slowed down during the current (fiscal) year.”
The price of the benchmark Arab Light crude oil had dropped to $66 per barrel in the global market compared to an average of $77 per barrel in first four months (Jul-Oct) of the current fiscal year, he said. The downturn in oil prices was playing a meaningful role in reducing Pakistan’s energy import bill in dollar terms. Earlier such imports had already shown a downturn in terms of quantity, he said.
The credit goes to the previous Pakistan Muslim League-Nawaz (PML-N) government, which initiated LNG-fired, coal-fired and nuclear power projects during its tenure.
Apart from this, the central bank has let the rupee depreciate by a massive 32% to Rs138.81 to the US dollar in the inter-bank market and has imposed regulatory duty on hundreds of goods to revive sluggish exports and slash exorbitant imports.
Published in The Express Tribune, February 17th, 2019.