PAKISTAN'S IMPORTS

S.KAMAL HAYDER KAZMI,
(feedback@pgeconomist.com)
Research Analyst
, PAGE
Nov 8 - 14, 2010

The trend towards more integrated economies that depend on the international exchange of goods has been accelerated over the past decades. The growth of imports over the last decade affected the regional economy both directly and indirectly. From a consumer's point of view, these are positive developments given that the availability of imports increases the variety of products and services available for purchase and may reduce their costs. On the production side, the rise of imports can be seen both, positively and negatively to the extent that imports are used in the production process, an increase in availability at a potentially lower price decreases production costs and enables the firm to remain competitive. On the negative side, imports may have a dampening effect on the economic development of industries if they become a new source of competition and substitute for goods and services that otherwise would have been produced regionally.

PAKISTAN'S 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

Pakistan's major imported items are petroleum products, machinery, chemical products, foods, palm oil, iron, and steel, plastic materials, fertiliser manufactured raw cotton and transport along with other products etc. Most of Pakistan's imports are concentrated in few numbers of market in the world namely Saudi Arabia, Kuwait, Malaysia, USA, Japan, Germany, and UK.

Data for July-March 2009?10 exhibit that almost 36 per cent of total import markets of Pakistan consist of these seven countries. Saudi Arabia has held the lion share in Pakistan's imports with in markets since 2003?04. However, signs of market diversification are present as the combined share of these major export partners has been declining from as high as 43 per cent in 2003?04 to current levels. However, import growth during July-April 2009?10 declined by 2.8 per cent against the same period last year (SPLY).

Lower international prices, compressed domestic demand, exchange rate depreciation, and improved production of cotton crops remained the major factors behind the overall decline in import bill. Among the major import groups: food, machinery and telecom groups witnessed a decline during July-April 2009?10 while petroleum, consumer durables, raw materials and other items groups witnessed an increase in growth during the period under review. Food group imports also declined 21.3 per cent during July-April 2009?10 over the SPLY. On absolute terms food group declined $754.9 million against the $107.9 million contraction in the corresponding period of July-April 2009?10. This decline in food group was mainly attributed to reduced quantum import as unit values of most of food items remained higher during July-April 2009?10 over SPLY.

IMPORTS

COMMODITIES

%CHANGE IN SEP, 2010 OVER (RS MN)

AUG, 2010

SEP, 2009

Petroleum products

-32.84

-17.99

Palm oil

-5.11

88.64

Petroleum crude

-53.54

-33.20

Sugar

162.88

359.44

Plastic materials

-1.28

34.27

Iron & Steel

17.70

43.46

Elec. machinery & apparatus

28.85

58.60

Iron & Steel scrap

2.33

127.91

Power generating machinery

-50.08

-62.05

Medicinal products

11.41

4.15

More recently, imports of the country during September 2010 amounted to Rs238,469 million (provisional) as against Rs257,680 million (provisional) in August 2010 and Rs200,431 million during September 2009 showing a decrease of 7.46 per cent over August 2010 and an increase of 18.98 per cent over September 2009. In terms of US dollars the imports in September 2010 was $2,780,598 thousands (provisional) as compared to $3,010,034 thousands (provisional) in August 2010 showing decrease of 7.62 per cent and increase of 14.93 per cent as compared to $2,419,314 thousands in September 2009. Imports during July-September, 2010 totaled Rs773,077 million (provisional) as against Rs626,129 million during the corresponding period of last year showing an increase of 23.47 per cent. In terms of US dollars the imports during July-September, 2010 totaled $9,029,439 thousands (provisional) as against $7,586,761 thousands during SPLY showing an increase of 19.02 per cent. Main commodities of imports during September 2010 were petroleum products (Rs31,110 million), palm oil (Rs13,650 million), petroleum crude (Rs12,580 million), sugar (Rs9,616 million), plastic materials (Rs9,473 million), iron and steel (Rs8,685 million), electrical machinery and apparatus (Rs6,458 million), iron and steel scrap (Rs5,618 million), power generating machinery (Rs5,248 million) and medicinal products (Rs4,568 million).

The floods that hit the whole agriculture will increase the imports in the country. These devastating floods have adversely affected the food supply chains. At the same time, almost 75 per cent of those affected by floods are the ones who relied on agriculture for sustenance. Even after the flood waters recede, it will take months, if not more, to resettle the internally displaced farm workers on the land they once tilled, thus causing further delays in domestic food production. Since July 2001, prices have more than doubled in Pakistan, as is evidenced by 128 per cent increase in prices in July 2010.

CONCLUSION

No doubt, high imports are a major concern for the Pakistan's economy. The recent worst floods have serious implications for macroeconomic stability and growth prospects in Pakistan. The government should take initiatives to contain the imports in FY11.