Oil, agri imports widen trade gap

Inward shipments of products under both categories surged 128% in Jul-Dec

KARACHI:

The sector wise analysis of trade figures for July-December 2021, released on Monday by the Pakistan Bureau of Statistics, revealed that imports of transport, petroleum and agricultural products offset the gains made by exports of textile and other sectors.

As reported earlier, the trade deficit during December 2021 clocked in at $4.9 billion, a jump of 87% year-on-year.

This took the deficit to $25.5 billion in the July-December period of this fiscal year, an increase of 107% on a year-on-year basis. “The gap widened primarily due to petroleum and agricultural imports that surged by 119% in December 2021 on the back of higher global crude oil and commodity prices,” AHL Head of Research Tahir Abbas underlined.

During July-December of FY22, imports under the two categories surged by 128% on a year-on-year basis, he said.

On the other hand, exports also witnessed an increase of 17% year-on-year to $2.7 billion in December 2021, he said.

The export figure surged to $15.1 billion in the first half of this fiscal year, a growth of 25% year-on-year.

Arif Habib Commodities CEO Ahsan Mehanti was of the view that textile exports performed well mainly due to devaluation of rupee against the US dollar and adverse impact of the Covid-19 pandemic on competitive economies.

The expensive imports of petroleum products and agricultural commodities contributed to the deficit, as the country witnessed a shortfall in local agricultural production, he pointed out. AHL auto analyst Arsalan Hanif underlined that imports of transport material mainly comprised of completely built units (CBU) and completely knocked down (CKD) kits.

On a month-on-month basis, imports of transport group declined by 8% on the back of 30% drop in CBU imports. Citing reasons being the decline, he said that depreciation of rupee coupled with the duties on CBU made the merchandise unattractive for the importers. “Going forward, this trend is likely to continue,” Hanif projected. “Trade deficit is bound to increase when imports are more than the exports,” Union of Small and Medium Enterprises (UNISAME) President Zulfikar Thaver said.

Moreover, debt servicing is also a grave concern, given the depreciation of local currency and interest rates.

“Petroleum prices have surged, resulting in hike in the logistics cost,” he said adding that the global demand of shipping containers had also hiked the freight charges.

Most of the segments, including textile, registered an increase in exports however, a few divisions depicted opposite trend, he pointed out.

“Even home remittances have increased,” he said.

Thaver was of the view that the imports of capital goods under China-Pakistan Economic Corridor (CPEC) projects had also contributed “to the increase in deficit for the time being”.

In the long-run, however, it would be fruitful as it would promote exports and import substitution, he added.

Earlier this month, a meeting, held with Adviser to Prime Minister on Commerce Abdul Razak Dawood in chair, discussed that the trade deficit was likely to come down following approval of the mini-budget as it would discourage imports following imposition of higher taxes on luxury items. “Import growth is likely to be reduced along with import value with the resumption of the International Monetary Fund (IMF) programme,” the participants were told.

“Reduction in trade deficit in the coming months is imminent due to a stringent ongoing review and the checks put in place by financial support providers.” Arif Habib Limited analyst Sana Tawfik said imports were expected to slow down on the back of a forecast decline in international commodity prices.

Published in The Express Tribune, January 18^th, 2022.

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