Merchandise imports slump 19pc in July-October

KARACHI: Merchandise imports sharply fell 19 percent year-on-year in the first four months of the current fiscal year as all the big-ticket products except machinery group posted double-digit decline in import, lending a significant support to the current account balance.

Pakistan Bureau of Statistics (PBS) data on Tuesday showed that imports stood at $15.3 billion in the July-October period compared with $18.9 billion in the corresponding period a year earlier.

Machinery imports rose 3.2 percent year-on-year to $3.1 billion. Import of petroleum products fell 19.5 percent to $4.2 billion. Agricultural imports dropped 17.2 percent to $2.6 billion. Metal imports slid 20.9 percent to $1.4 billion.

In October, imports fell 15.2 percent year-on-year to $4.1 billion as there were slumps in inbound shipments of petroleum, transport and textile products. The major dip in imports augured well for the current account that turned surplus in October for the first time in four years. On month-on-month base, imports, however, increased around eight percent last month.

Exchange rate devaluation and regulatory duties on imports led to a noticeable reduction in import bills. Rupee lost more than 20 percent alone last year against the dollar, having emerged as the one of worst performing currencies in Asia.

Despite all its benefits to cash-bleeding economy, import reduction might further aggravate the wilting economic growth that dropped to 3.3 percent last fiscal year from a decade high of 5.5 percent in the preceding fiscal year.

The State Bank of Pakistan projected growth between 3 and 4 percent in the current fiscal year mainly due to macroeconomic stabilisation measures taken to revive the faltering economy.

In July-October, import of fertiliser plunged around 26 percent, followed by insecticides (dipping 17 percent), plastic materials (falling 16 percent) and medicinal products (9.1 percent).

The agriculture sector registered a marginal growth of 0.8 percent during FY2019, in a sharp contrast to 3.9 percent growth a year earlier, primarily due to a contraction in the production of the crop sector.

Analysts said massive depreciation in the local currency during the past couple of years increased the cost of production, hurting large-scale manufacturing from agriculture sector to automotive sector.

Import of used and old cars, which are alternative to supply-crunched auto market, sharply skidded 81 percent due to a condition of payment of duty and taxes in foreign exchange. Besides, improvement in external sector is stemming from import curb rather than growth in exports.

Although there was a growth in export volume, exports in terms of value continued to post insignificant recovery in the July-October period.

Textile exports slightly increased to $4.6 billion compared with $4.4 billion. Barring readymade garments, no other value-added textile industries witnessed double-digit growth. Readymade garments fetched $907 million in exports in the first four months, up 12 percent year-on-year. Knitwear exports were up around 9.5 percent to 1.1 billion, while bed wear exports increased around six percent to $818 million.

In July-October, major thrust came from food exports that rose 16.2 percent year-on-year to $1.4 billion. Rice was the main driver in the food group earning the country $634 million. Manufacturing sector largely performed poorly during the period under review as its exports dropped 6.1 percent to $1.1 billion. In October, exports rose around seven percent year-on-year and 14.4 percent month-on-month to $2 billion. The central bank sees exports to pick up during the fiscal year, “conditional on demand conditions among the country’s major trading partners and buoyancy in commodity markets”.

“In particular, onset of fiscal stimulus and successful resolution of trade negotiations involving major economies would be instrumental in supporting global consumer demand, which would in turn bode well for exporting partners, including Pakistan, along with improved prospects of foreign investments,” it said in a report.