IMPORTS FROM PAKISTAN

S. KAMAL HAYDER KAZMI,
(feedback@pgeconomist.com)
Research Analyst
, PAGE
Oct 4 - 10, 2010

Imports are a key part of international trade and the import of capital goods in particular is vital to economic growth. This is so because imported capital goods directly affect investment, which in turn constitutes the motor of economic expansion. Economic reform is expected to affect imports as part of the strategy to restore external balance. However, unless policy makers know what the major components of imports are and how they are determined, such a policy decision can be harmful to investment and output if domestic production relies on imports.

Imports into Pakistan during August 2010 amounted to Rs257,680 million (provisional) as against Rs276,928 million (provisional) in July 2010 and Rs209,267 million during August 2009 showing a decrease of 6.95 per cent over July 2010 but an increase of 23.13 per cent over August 2009. In terms of US dollars the imports decreased by 7.06 per cent in August 2010 to $3,010,034 thousands (provisional) as compared to July 2010 $3,238,807 thousands (provisional) but increased by 23.13 per cent as compared to August 2009 $2,528,249 thousands.

PAKISTAN IMPORTS

COMMODITIES %CHANGE FOR VALUE IN MILLION JULY, 2010 RUPEES IN AUGUST, 2010 OVER AUGUST, 2009
Petroleum products 38.21 10.86
Petroleum crude -50.01 42.17
Palm oil 37.48 78.21
Power generating machinery -10.38 50.19
Plastic materials 0.97 28.96
Iron & Steel 13.73 -0.32
Iron & Steel scrap 48.78 100.44
Raw cotton -34.25 144.50
Electrical machinery & apparatus -25.23 16.40
Fertiliser manufactured -13.91 -50.26

Imports during July-August 2010 totaled Rs534,608 million (provisional) as against Rs425,698 million during the same period of last year (SPLY) showing an increase of 25.58 per cent.

In terms of US dollars the imports during July-August 2010 totaled $6,248,841 thousands (provisional) as against $5,167,446 thousands during SPLY showing an increase of 20.93 per cent. Main commodities of imports during August 2010 were petroleum products (Rs46,324 million), petroleum crude (Rs27,075 million), palm oil (Rs14,385 million), power generating machinery (Rs10,512 million), plastic materials (Rs9,596 million), iron & steel (Rs7,379 million), iron & steel scrap (Rs5,490 million), raw cotton (Rs5,225 million), electrical machinery and apparatus (Rs5,012 million) and fertilizer manufactured (Rs5,131 million). However, the balance of trade in August 2010 was negative 106,002 million rupees and negative 1,238,240 thousands US dollars. The cumulative balance of trade from July-August 2010 was negative 230,058 million rupees and negative 2,689,135 thousand US dollars.

Currently, Pakistan has vast untapped resources of minerals especially in the province of Balochistan. According to an estimate, 600,000 sq kilometers of non-crop area shows geological potential for a number of metallic as well as non-metallic minerals. Exploration activities as well as various geological surveys have confirmed the presence of metallic minerals like copper, iron, lead, gold, silver, platinum, chromites, and zinc. Despite this huge potential, Pakistan imports billions of dollars worth of various minerals. In addition, there is a vast export potential for various industrial minerals including multi-colored granite, marble and other gems and stones of high quality.

In the country, production of cotton cloth during fiscal year 2008-09 was more or less the same as in fiscal year 2007-08. It is disquieting that despite huge depreciation of rupee against the US dollar as well as export subsidies available to the industry, the competitiveness of Pakistani cloth and other textiles remained low. For instance, due to the ongoing recession, US imports from Pakistan dropped sharply by 9.8 per cent. US imports from India and China also declined but the magnitude of decline was quite lower (3.5 per cent and 6.5 per cent respectively).

This was perhaps due to frequent energy slippages and domestic security issues that hindered exporters from meeting buyers' timeline and not allowing major improvement in export orders.

YEARLY IMPORTS (MILLION US$)

YEAR IMPORTS
2002-03 11,333
2003-04 13,604
2004-05 18,996
2005-06 24,994
2006-07 26,989
2007-08 35,397
2008-09 R 31,747
2009-10 P 31,054

Moreover, it appears that domestic textile exporters are losing ground against regional competitors because of negative country image, lack of research and product development and extensive subsidies provided to the regional counterparts.

Public sector construction activities remained low during the year. As a result, production as well as imports of metals declined in FY09. Energy shortages also caused sharp productivity losses in metal re-rolling units.

In addition, the growth in wholesale and retail trade slowed down to 3.1 per cent in FY09 as against 5.3 per cent in FY08. This slowdown is primarily attributed to decline in manufacturing and imports during the year. These two heads account for more than 60 per cent of the value addition in wholesale and retail trade. The weak domestic demand caused sharp decline in manufacturing production as well as imports during the year. However, aggregate cargo handling activities also witnessed a marginal decline in FY09 as a sharp fall in imports was largely offset by a strong surge in cargo handling of exports.

CONCLUSION

The recent catastrophic floods have serious implications for macroeconomic stability and growth prospects in Pakistan. However, even before the floods, the macroeconomic conditions and outlook were looking fragile. Currently, assessments indicate that this flood pressure is unlikely to increase the imports of the country in the current fiscal year.