Pakistan’s exports to Afghanistan fall sharply in July

­By our correspondent

KARACHI: Pakistan’s exports to Afghanistan declined 56.14 percent to $38.557 million in July from $87.915 million a month ago, State Bank of Pakistan's (SBP) latest data showed.

The exports to the neighbouring country fell 38.57 percent year-on-year. The exports stood at $62.774 million in July 2020.

The volume of Pakistan’s exports to Afghanistan has been declining for the past few years.

The non-tariff barriers, lethargic bureaucracy, poor infrastructure and unstable geopolitics are seen as major hurdles to trade with Afghanistan.

Moreover, the previous Afghan government led by the President Ashraf Ghani was more dependent on India, Iran and its Central Asian neighbours for its trade needs. So, it bought fewer Pakistani products, especially cement and iron to meet its requirements.

The SBP’s data showed that Pakistan’s imports from Afghanistan also fell to $12.405 million in the first month of the current fiscal year from $15.501 million in the prior month. The country imported $4.216 million worth of Afghani products in July last year.

The data compiled by Pakistan’s customs showed that the volume of bilateral trade with Afghanistan fell sharply on August 15 when Taliban took control of Kabul. There were very fewer trucks carrying goods exports and imports crossed borders at Torkhom and Chaman.

However, the number of cargo vehicles rose across the western border during the last week.

Pakistan exports to Afghanistan rose to $983.2 million in FY2021 from $890 million in the previous fiscal year.

Analysts said with less Indian influence Pakistan might be able to increase exports to Afghanis in the long run.

India exported $170 million refined sugar, $267 million textile related products, $70 million medicaments, $28 million tobacco products and $9 million footwear to Afghanistan in 2020.

“If trade diversion happens and some part of it is diverted to Pakistan, then these industries in Pakistan stand to benefit from such proposition,” said the report published from Alfalah Securities.

In 2003, just two years after the Taliban government was overthrown by the US and its allies Pakistan’s exports to Afghanistan rose by 185 percent to $408 million. In the two-decade of US rule, Pakistan’s exports to Afghanistan grew at a compound annual growth rate of 10 percent to $800 million in 2020, and at their peak exports touched $2.7 billion in 2011, after which they dropped as Pakistan banned the export of petroleum products to fulfil domestic demand.

“With Taliban back in control, it makes all the sense to expect cross border trade to see disruptions," Alfalah Securities said.

"That said, a deeper look into export breakup shows that essential edible items and pharmaceuticals constitute 56 percent and 9 percent of total exports, which in our view should not see major decline.”

The $75 million cement and $31 million steel exports could see a decline, as the massive US spending is withdrawn. However, for Pakistani cement and steel industries these numbers are just a fraction of their sales, it added.

Pharmaceutical products of Pakistan are amongst the top five exports to Afghanistan in value terms. However, the quantum of these exports stands meagre when analysed in terms of exports of listed pharma companies.

Food-related products constitute the biggest chunk of exports to Afghanistan, according to the report.

Steel exports to Afghanistan are almost entirely catered by unlisted players in the erstwhile FATA region.

A reduction in steel exports will have no direct impact on earnings of listed space, however, it can lead to dumping of those products in Pakistan outside of the former FATA region thus indirectly compressing margins of listed players.