Pakistan’s imports hit near three-year high of $5.66 billion in March with major contribution coming from import of wheat and sugar, oil and gas, fertilisers and pesticides, automobiles, mobile phones and machinery and equipment for industries.
The increase in imports suggests that Pakistan’s economic activities are on a rise amid the third wave of the Covid-19 pandemic.
However, persistent growth in imports - which grew over 71% to $5.66 billion in March compared to $3.3 billion in the same month last year - may widen the country’s current account deficit, which means that Pakistan’s capacity to make international payments for imports and foreign debt repayment would become weaker.
“The latest trade numbers do not suggest that the economy is heating up,” said Arif Habib Limited Head of Research Tahir Abbas while talking to The Express Tribune.
“The good thing is that exports also surged in March along with imports” he said.
Exports increased 31% to $2.36 billion in March compared to $1.81 billion in the same month last year, Pakistan Bureau of Statistics (PBS) reported on Saturday.
The problem is that growth in exports is nominal compared to imports in percentage terms, while total volume of exports in dollar terms stands at less than half of imports.
In absolute terms, exports surged by almost one-fifth ($500 million) of the imports that clocked-in at $2.3 billion in March. Therefore, a notable growth in exports is a must to create a balance in trade.
“If the current trend of massive import growth and nominal export growth is maintained over the next three to four months, then the economy may show signs of heating up,” he said.
He said that strong inflow of workers’ remittances has helped the economy maintain its current account balance (the gap between foreign currencies inflows compared to outflows) in a surplus at $881 million during the first eight months (July-February) of current fiscal year 2021.
Abbas noted that the growth in imports and exports was magnified in March compared to the same month of last year when trade volumes had declined in the wake of imposition of nationwide lockdown to contain the Covid-19 pandemic.
Growth would remain on the higher side over the next three to four months considering the low base effect of similar months (April-June) last year, he said.
The imports, however, have surged partly due to mismanagement of agriculture output by the government and the private sector. The government failed to notice last year (FY20) that the wheat and sugarcane productions had dropped significantly due to different reasons while cotton output declined to a decade-low volume.
The private sector speculated over the situation and significantly pushed the prices of wheat flour and sugar upward. To recall, Pakistan was a net exporter of wheat and sugarcane two years ago. Besides, the country also used to export a good quantity of cotton and cotton-made yarn as well.
Imports of the food group surged 91% to $777 million with wheat and sugar imports surging by 100% and 139% during the month, respectively, compared to the same month of last year, according to PBS.
Import of oil and gas - mainly refined petrol and diesel - surged significantly ahead of the start of wheat harvesting season of FY21.
The petroleum group imports surged 66% to $1.1 billion during the month with refined petroleum products and crude oil imports increasing by 73% and 97%, respectively. The import of machinery group surged 72% to $1.07 billion in March with power generators, mobile phones and apparatus and office and textile machinery imports steering the rise.
The transport group imports soared 184% to $322 million in March with automobiles, motorcycles and their parts showing a growth of 160-250% in the month compared to the same month of last year.
The import of agriculture and other chemicals surged 64% to $907 million in the month with import of fertilisers and insecticides soaring by 100-136%.
Textiles remained the singular largest export earning sector of Pakistan. It attracted almost 60% of the overall export earnings. The export of textile group surged 30% to $1.35 billion in March 2021 compared to $1.03 billion in the same month of last year, according to PBS.
Published in The Express Tribune, April 18th, 2021.