MACROECONOMIC INDICATOR

.

.
Selected by Zeeshan Ahmed Khan
(economistzeeshan@hotmail.com)

Aug 08 - 14, 2005
.

 

 

 

IMPORTS

Imports witnessing rising trend

A sudden surge in the imports from $15.59 billion to $20.6 billion is a matter of concern

The imports of Pakistan have witnessed a rising trend in the year 2004-2005 and stood at $20.6 billion against the targeted amount of $16.7 billion. In the mean time the exports of Pakistan remained at $14.41 billion, thus creating a trade deficit of around $6 billion.

A sudden surge in the imports from $15.59 billion to $20.6 billion is a matter of concern.

However, the government officials say that this high increase in imports and trade imbalance is not a point to ponder as the trade deficit has originated due to higher import of investment goods rather than consumer goods. The imports of machinery and industrial raw material are the examples in this case as the imports of machinery and industrial raw materials in the year 2004-2005 have recorded an increase of 38 and 32%, respectively.

The imports of Pakistan in the year 2004-2005 grew by 32% as against the targeted rate of 7.1%. The extra-ordinary increase in imports was mainly due to strengthening domestic demand and higher prices of crude oil and petroleum products. The surge in domestic demand fueled an exceptional 41.5 percent increase in non-food non-oil imports.

Pakistan's imports are highly concentrated in a few items, namely: machinery, chemicals, edible oil, petroleum & petroleum products, transport equipment, iron & steel, fertilizer and tea. Among all, imports of machinery, chemicals and metal group were up by 54.9 percent, 32.9 percent and 79.6 percent, respectively, as domestic investment has come back to life owing to stronger domestic and external demand. These three groups alone accounted for over one-half of total imports, clearly reflecting the growing level of domestic investment.

Rising prices of international oil are the major downbeat for Pakistan. The unprecedented rise in oil prices struck the economy at a time when domestic demand was showing signs of acceleration. The imports of both crude and petroleum products are up by 18.8 percent and 8.4 percent, respectively, in quantity terms pushing the total oil import bill up 30.9 percent. Both quantity and prices are responsible for the surge in imports as 69 percent rise is accounted for quantity and the remaining 31 percent to the rise in prices of major import items. Had the prices of major import items remained at the last year's level Pakistan would have not paid additional $536.7 million on imports. The Economic Survey 2004-2005 reveals that due to this surge in prices, Pakistan has paid additional $135.7 million and $218.1 million for the import of petroleum products and petroleum crude, respectively. The additional import bill for synthetic fibre and fertilizer stood at $19.8 million and $51.8 million, respectively. Similarly soyabean oil and plastic material share an additional bill of $17.5 million and $66.5 million, respectively.

 

 

Over the last few years the government has adopted an export-led growth policy, but it must be realized that all the efforts to enhance exports are worthless without liberalizing the imports. Fortunately, Pakistan's import regime has been reformed, restructured and liberalized over the years to meet the economy's ongoing structural shifts. Import related irritants impacting investment have also been removed to facilitate the import of capital goods and raw material.

For a number of years, the government has been following a policy of trade facilitation. For this reason the government has allowed the import of machinery in sectors like Marble & Granite, Poultry & Meat and Gems & Jewellery, etc. All these sectors have significant export potential and government measures to import machinery without customs duty and sales tax would exploit it completely.

It seems to be an uphill task for the government to keep the balance of trade positive in the wake of globally increasing prices and demand. However, announcements of policies like liberalization of imports, widening of temporary import facility and regulations in the Trade Policy 2005-2006 promises that Pakistan of tomorrow would be very different from what it is today.