Pakistan experienced a 13% decline in overall energy imports, reaching $1.42 billion in November 2023, shedding light on subdued demand for petroleum, oil, and gas products. Economic activities remained lacklustre due to sluggish growth, and the recent surge in product prices has hampered purchasing power across various sectors.
The diminishing demand for products, particularly furnace oil utilised in power production, prompted refineries to explore export opportunities. By exporting furnace oil, refineries created room to import larger quantities of crude oil, which, in turn, allowed them to produce premium products such as petrol and diesel.
According to the latest data from the Pakistan Bureau of Statistics (PBS), refined product imports plummeted by 29% to $499 million in November compared to $708 million in the corresponding period last year. Meanwhile, crude oil imports increased by 4% to $566 million, up from $546 million in the same month the previous year.
The import of Re-gasified Liquefied Natural Gas (RLNG) experienced a 9% decrease, amounting to $290 million, largely due to elevated international prices and the country’s dwindling foreign exchange reserves, impeding its ability to finance such imports.
Industries, including major players like the textile sector, displayed reluctance in purchasing expensive imported gas, as the rising costs made it economically unviable for sustaining factory operations and overall economic activities.
A leading analyst attributed the decline in energy imports to both slow economic activities and the withdrawal of subsidies from petroleum and gas products, significantly impacting the purchasing power of a large section of society.
The lacklustre performance in large-scale manufacturing (LSM) industries, coupled with a 33-month low in electricity production in November, underscores the continued sluggishness in economic activities.
Despite achieving a GDP growth of 2.1% in the first quarter (Jul-Sep) of FY24, analysts caution that this growth is influenced by specific factors such as improved agricultural output, particularly in cotton and rice. The low-base effect and the contraction of the economy by 1% in the same quarter of the previous year further contribute to the perceived turnaround.
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Experts predict that energy imports and demand for related products are likely to remain subdued throughout the current fiscal year. The caretaker government’s focus on implementing stringent International Monetary Fund (IMF) conditions, including tight monetary and fiscal policies, does not align with pro-growth strategies in the short term.
Anticipating more growth-friendly policies following the February 2024 elections, analysts believe that the next elected government may spearhead initiatives to boost economic growth and subsequently increase demand for energy products by late FY24 or early FY25.
In the first five months (Jul-Nov) of the current fiscal year 2023-24, cumulative energy imports witnessed a 16% decline, amounting to $6.45 billion compared to $7.70 billion in the same period the previous year.
Petroleum Exports Surge
According to PBS data, Pakistan’s petroleum product exports surged to $44 million in November, marking a 512% increase from a mere $7 million in the corresponding month last year.
Recent developments reveal that petroleum refineries primarily exported furnace oil after domestic demand dropped to a mere 10% of the daily output, ranging from 5,000 to 6,000 tonnes. This decline followed the government’s decision to curtail power production from oil-run plants, opting for more cost-effective alternatives like hydel and nuclear power.
Leading refineries such as Pak-Arab Refinery (PARCO) and Pakistan Refinery (PRL) played a significant role in exporting furnace oil among the five refineries currently operational in the country.
Published in The Express Tribune, December 22nd, 2023.
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