Pak trade performance almost stagnant

ISLAMABAD: During the first 11 months of 2012, Pakistan’s trade performance was almost stagnant, as exports dipped by 3.06 percent while imports rose by 1.9 percent over the corresponding period last year. Independent economists attribute these developments to some foreign and domestic issues that confront the country. This scenario has pushed the trade deficit to $17.859 billion — a figure far bigger than Pakistan’s existing foreign exchange reserves, experts say.

Cumulative exports from January to November 2012 stood at $22.626 billion while imports were recorded at $40.485 billion. In the same period during 2011, exports were at $23.341 billion and imports were $39.729 billion.

During the period under review, the trade gap has increased by 8.97 percent over the corresponding period last year, which economists consider an alarming indicator. This sluggish trade performance is indicative of slow economic growth.

Economists believe that Pakistan faced problems on the international front due to a difficult economic environment in the developed world. A downturn in world trade and a drop in international commodity prices hit exports growth. Furthermore, problems with domestic infrastructure – such as energy shortages and lawlessness – also weren’t remedied and Pakistan resultantly lost export orders worth billions of dollars.

The monthly average exports during these 11 months of 2012 stood at $2.057 billion against $2.122 billion per month during the comparable period last year. Month-wise imports averaged $3.68 billion from Jan-Nov 2012 and remained higher than the average import of $3.612 billion in the same period last year.

To protect Pakistan’s exporters from losing out to other markets, especially those located in Latin America, Africa, Asia and Middle Eastern countries, the country should encourage technological upgradation and develop agriculture, cottage industry, handicrafts as well as gems and jewelry sectors, experts say.

According to the annual plan, the government has projected an export target of $25.812 billion for the fiscal year 2012-13.

In the first five months July-November 2012-13, it has achieved 39 percent (or $10.08 billion) of the target. Interestingly, the Ministry of Commerce, which was scheduled to announce a three-year Strategic Trade Policy Framework 2012-2015 in July 2012 to boost exports to $30 billion, still hasn’t announced it. The country’s first ever three-year policy framework – for 2009-2012 – expired in June 2012.

During the period under review, rice exports decreased by 7.58 percent to $1.714 billion against $1.85 billion in the corresponding period last year. Of total rice exports, basmati rice exports declined by 28 percent to $609.8 million, while in the same period last year they fetched $847.7 million.

Failure to conclude a barter agreement with the Islamic Republic of Iran, in the absence of a mechanism to circumvent financial sanctions on the country, further constrained sales in this segment. The sector faces severe energy shortages but its overall good performance is expected to be sustained by ample and affordable availability of common varieties, shipments of which have been further aided by a depreciating rupee.

The textile sector was hit hard by power shortages and low demand internationally, as during this period textile exports totalled $11.829 billion, which was 5.6 percent less than last year. Due to this phenomenon, the quantum exports of high value added items such as knitwear, bed wear, towels and readymade garments have shown negative growth during the period under review.

Cotton yarn export remained almost stagnant at $1.88 billion against $1.87 billion last year, while raw cotton exports increased by 14.5 percent to $368.63 million. Cotton cloth exports decreased by 4.5 percent to $2.36 billion; knitwear by 13.76 percent to $1.81 billion; bed wear by 19 percent to $1.539 billion; towels by 3.8 percent to $669.1 million; and Pakistani readymade garments in the international market also fell by 2.2 percent to $1.603 billion over the corresponding period last year.

Moreover, petroleum and coal exports from Jan-Nov 2012 decreased by 72 percent to $352.9 million against $1.26 billion in the corresponding period last year. Leather manufactures exports also decreased by 11.9 percent to $444.41 million and same was the case with surgical goods exports, which also decreased by 2.3 percent to $258.32 million. Sales made by the chemical sector also declined by 9.74 percent to $860.6 million.

The sectors which performed well include engineering goods, whose exports rose by 5.97 percent to $280.64 million, and jewellery, which rose by 307.2 percent to 1.685 billion in this period. Cement exports also increased by 19.47 percent to $504.9 million over the same period last year.

On the other hand, petroleum (crude and its products) imports during the period under review comprised more than one-third of the country’s total imports and stood at $14.08 billion against $12.94 billion last year, showing an increase of 8.78 percent. Besides, imports of motor cars rose by 21 percent to $800.65 million, mobile phones 11 percent to $641.6 million and tea imports increased by 1.84 percent to $326.8 million.

Manufactured fertilisers imports decreased by 34 percent to $541.6 million and imports of plastic materials declined by 11.64 percent to $1.30 billion, while gold imports increased by 22.9 percent to $160.2 million over the corresponding period last year.

In the textile sector, raw cotton exports decreased by 41 percent to $479.3 million and synthetic fiber by 28 percent to $390.3 million.

During this 11-month period, palm oil imports went down by 7.25 percent to $1.975 billion from $2.13 billion last year. In the machinery imports category, power generation machinery imports remained almost the same as they stood at $832.75 million against $831.39 million last year. Textile machinery imports also stood at almost the same level as last year. During this period imports stood at $378.78 million against $382.86 million last year.

However, imports of agriculture machinery dipped by 5.9 percent to $107.7 million. Construction and mining machinery imports rose by 61.3 percent to $160.2 million and electrical machinery imports rose by 6.6 percent to $692.2 million.

In this period, iron and steel (scrap) imports increased by 18.1 percent to $543.3 million and iron steel by 11.8 percent to $1.32 billion over the same period last year.

Former chairman of the Federal Board of Revenue (FBR), Ahmad Waqar, said, “As Pakistan is a member of the World Trade Organization (WTO) and internationally, custom duties are on the decline, Pakistan is also doing the same so the country’s revenues will fall in coming years. The government should bring the untaxed in the tax net, he said.

“In Pakistan, there is an issue of revenue, so we have to go to the International Monetary Fund (IMF), otherwise we will face severe problems, as printing of money will not cushion us but will harm,” said Waqar.

Kaiser Bengali, a senior economist said, “It is a worrisome trend that Pakistani exports are declining and the gap between exports and imports is widening. That will put further pressure on the Pakistani rupee. Textiles, rice and leather, that are major foreign exchange earners, are in the negative and this is not a good sign for the economy.”

EXPORTS PERFORMANCE (US$bn)

Month 2012 2011

December 1.854

January $1.95 2.307

February $2.03 2.141

March 2.001 2.463

April 2.24 2.365

May 2.159 2.296

June 2.141 2.422

July 2.057 2.157

August 1.911 1.945

September 2.219 1.832

October 2.016 1.88

November 1.896 1.533

Total 22.626 23.341

3.06 percent decline over last year

Source: PBS data

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