No steps to curb swelling imports

ISLAMABAD:

The government on Thursday did not make any policy decision to curb soaring imports while hoping that the record import bill would come down gradually due to stability in global commodity prices, as new statistics revealed the highest-ever five-month trade deficit of $20.6 billion.

Finance Adviser Shaukat Tarin hurriedly called a meeting to review the balance of trade position. But like many other such sittings, the meeting ended on a satisfactory note that global commodity prices had started receding.

According to economic managers, high commodity prices were a reason for the record $7.85 billion worth of imports into Pakistan in November 2021.

The Pakistan Bureau of Statistics (PBS) on Thursday released data which showed that the trade deficit widened to $20.6 billion in the first five months (July-November) of current fiscal year due to a significant surge in imports that outpaced the increase in exports.

The deficit was $10.9 billion, or 112%, more than the comparative period of previous fiscal year, it added.

The widening trade deficit suggests that by June next year, it will be far higher than the target of $28.4 billion set by the government. The five-month deficit was already equal to 72.5% of the annual target.

During July-November FY22, exports increased 26.7% and stood close to $12.4 billion as compared to $9.7 billion in the same period of previous year, according to the national data collecting agency.

In absolute terms, there was an increase of $2.6 billion in exports during the first five months of FY22.

During the five-month period, the exports were equal to 47% of the annual target of $26.3 billion. However, the Ministry of Commerce projects that exports will touch $31 billion in the full fiscal year.

Read Exports touch record high at $2.9b

Imports during July-November FY22 increased 69% to nearly $33 billion. In absolute terms, the imports grew $13.5 billion, according to the PBS.

The central bank has introduced cash margin requirement for more imported goods besides curtailing consumer financing to ease import pressure. However, these measures have failed to contain imports that have risen to a new peak.

The federal government has not yet implemented any new administrative measures to supplement the central bank efforts.

November data

Imports ballooned to $7.84 billion in November, which were higher by 83%, or $3.6 billion, over a year ago, according to the PBS. It was the highest-ever import figure, which was $1.5 billion more than the estimate of Ministry of Commerce, jeopardising the external sector projections.

Exports of goods remained at $2.9 billion in November 2021, according to the PBS. They were higher by 33%, or $713 million, over the same month of previous year.

As a result, the trade deficit widened 134% year-on-year to $5 billion in November 2021.

The finance adviser-led internal meeting on the growing trade deficit ended on a satisfactory note. “It was informed that there will be less import of food items, furnace oil and vaccine in the coming months that will significantly reduce the pressure on trade bills in the second half of current fiscal year,” said a statement issued by the Ministry of Finance.

Read more Ministry closely watching imports

The ministry stated that “the pressure on import bill was mainly due to high global commodity prices, especially energy, steel and industrial raw material”.

The forum also noted that high import of vaccines contributed significantly to the rise in import bill, it added.

The ministry stated that Tarin advised the authorities to take effective policy measures to reduce unnecessary imports of luxury items.

However, the sources said that no measures were discussed during the meeting to curb imports. The meeting noted that global prices of crude oil and coal had started falling, which would reduce the import bill.

Sources said that finance and commerce ministries were of the view that there was no major increase in the quantity of imported goods and the $7.85 billion import bill was because of higher commodity prices.

Petroleum secretary informed the meeting that the country would no more import major furnace oil consignments, which would help reduce the trade deficit.

The commerce ministry said that imports of cotton, sugar, crude oil, liquefied natural gas (LNG) and Covid-19 vaccines increased significantly during the first five months of FY22. Raw material and capital goods imports also increased.

Two days ago, the finance adviser decided to slap a ban on import of cars for seven months, which was worth roughly $30 million a month. But it will result in savings of nearly $210 million in seven months, which is equal to only 0.6% of the five-month import bill.

The central bank’s foreign currency reserves have been constantly on the decline and dipped further to $16 billion during the week ended November 26, 2021, reported the SBP. There was a $244 million reduction in reserves in one week.

Published in The Express Tribune, December 3^rd, 2021.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.