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Decline in imports contributes to reduce gap

By AMANULLAH BASHAR
Feb-18   24, 2002

Pakistan's trade deficit has been improved by 49 per cent in the first half of the current financial year. The improvement in trade gap has come only because of reduction in imports that may have an adverse effect on overall growth of the economy in the remaining half of the year. The reduction in oil imports estimated at around one billion dollar during the period is one of the major players for bringing down the gap. The reduction of oil consumption in the manufacturing sector however signals to take appropriate steps to reactivate the industrial growth.

Though the inflow of foreign assistance offsetting the negative impact yet situation demands to take measures to improve the pace of economic activity within the country. More trade is certainly better than the aid.

Besides various steps, the government is in the process of promulgating an Ordinance to give effect to its policies for the improvement of trade and transportation.

The goal of the project is to improve Pakistan's competitiveness in global trade and modernizing trade and transport related laws, simplifying and streamlining trade and transport procedures.

The business community in Pakistan has demanded of the European Union and Northern America Free Trade (NAFTA) that they must accord the "most favoured nation" status to Pakistan to help it revive its economy that has been hit hard because of the Sept 11 events.

The trade statistics revealed that the country recorded a trade deficit of $578.1 million during the first seven months that July-January of the current fiscal against $1.34 billion of the corresponding period of last year.

The provisional figures of the trade have revealed that trade deficit has improved by 49 per cent during the period.

Imports dived by 10 per cent $635 million to $5.733 billion from last year's $6.368 billion.

Major factor behind this slowdown in economy was cancellation and postponement of export and import orders in the aftermath of September 11 events. Despite all these hindrances, the county has achieved 90.2 per cent of the target set for this period, whereas 89.2 per cent target was achieved in the corresponding period last year.

Exports in January were $646 million below the target as the government had expected $761.8 million exports but it could drag only to $697.2 million.

Imports dropped by $11.8 million to $857.8 million against $972.8 million in January last year.

Commerce Minister Abdul Razak Dawood had recently projected a deficit of $1 billion due to declining trend in exports but the trade figures have not indicated much negative impact on exports. Enhancement of EU quota would have a positive impact on Pakistan's overall exports while signals from Washington were also encouraging.

According to an estimate, the textile quota exports to European Union recorded a big jump in value 41.9 per cent and in quantity 36 per cent while exports to Turkey received 113.5 per cent boost in value and 72.7 per cent in quantity during January.

The record jump is said to be the result of the enhanced quota and duty free import package offered to Pakistan.

The quota export performance compares unfavourably with the exports to the US which declined by 32.8 per cent in value and 5.3 per cent in quantity during the same period.

Export Promotion Bureau has released statistics of textile exports to Canada, which also indicate a decline by 15.9 per cent in the value and 21.1 per cent in quantity in January. The average unit price of textile exports decreased by 29 per cent in case of the US, but registered an increase of 4.3 per cent for EU, 6.5 per cent for Canada and 23.5 per cent for Turkey.

The total quota exports during January were 120.46 million square meters worth $90.8 million registering over 90 per cent jump in terms of value and 2.8 per cent in terms of quantity.

Region wise break up of the exports shows that exports to the US were 21.78 million square meter worth $40.5 million, 89.39 million square meter worth $46.5 million to the EU: 1.07 million square meter worth $1.51 million to Canada and 8.22 million square meter worth $2.24 million to Turkey.

The base ceiling of textile exports increased by 9.5 per cent in case of the US, 22.77 per cent to the EU, 11.76 per cent to Canada and 5.21 per cent to Turkey.

The oil import bill in 2001-02 is expected to go down by one billion US dollar mainly due to two reasons, one decline in industrial consumption and shifting over of the oil consumption especially in power generation and transport sectors. Another factor instrumental in decline of the import bill is being attributed to global fall in oil price.

Oil imports in the first half of 7 months of the current fiscal denoted a decline of 25.61 per cent to $1.530 billion from $2.057 billion of the corresponding period of the previous financial year.

It may be noted that oil price last financial year were around $25-30 a barrel. However the high price trend subsides with the beginning of the current fiscal in May-June last bringing down the oil prices.