Pakistans foreign trade scorecard has been largely positive thus far in FY13. As per data compiled by the Pakistan Bureau of Statistics (PBS), the countrys trade deficit for the seven month period ending January 2013 contracted by over 12 percent YoY to come down to $11.6 billion - thanks to a decent 7.2 percent growth in export shipments and a 2.4 percent slump percent in imports relative to last year.
Export during the period exceeded $14 billion dollars, thanks to the gains that emanated mostly from sectors such as textile and foods, and other items like cement, jewelry and leather garments. The textile group exports have been the most impressive. Contributing as much as 53 percent to the overall exports figure in 7MFY13, the textile items fetched in $7.5 billion, which depicts a YoY growth of 8.39 percent.
While raw cotton shipments have declined by more than 50 percent during the period, cotton yarn exports have continued to surge (see the illustration). As in previous months, the demand from Chinese textile mills, who have been shopping for cheaper yarn from Southeast Asia, is said to have driven this exceptional growth.
Cotton yarn shipments declined in January both on YoY and month-on-month basis. Yarn exports are expected to emit more steam in the future with the anticipated rise in price differential between domestic and imported yarn, along with the gradual demise of basic textile mills in China.
During the seven-month period, the value-added textile segment enjoyed robust growth in export shipments, except for bedwear whose exporters faced fierce competition from regional peers. The European Unions Autonomous Trade Preference Scheme for Pakistan - which went live in November last year and runs till December 2013 - is said to be fueling growth in the VA segments.
The month of January was a special one for value-added textile exporters due to significant growth in quantities shipped overseas.
According to TDAP, the package has allowed for temporary suspension of import duties on 75 items, which include the value-added textile segments among other tariff lines. The EU-ATP is a constant for the rest of the year now, leaving the big variable of adequate energy supply. Therefore, growth in the VA segment during the rest of the FY13 is dependent more on the availability of gas and electricity to the units.
The overall export growth was also supported by the food group, whose exports clocked in at $2.55 billion during 7MFY13, growing nearly nine percent YoY. Rice shipments have been in a constant freefall, but managed to provide over a billion dollars in proceeds due to relatively better showing by the non-Basmati varieties. The food group growth was possible due to markedly increased shipments of items like sugar, meat, fish, spices and vegetables.
Imports stood at $25.6 billion in the seven month period. A wide range of items is responsible for the import fall of 2.4 percent YoY during this period, with major shipment declines in items such as processed milk and baby food, spices, pulses, machineries for power generation, textiles and agriculture, CKD and SKD motor cars, auto parts and accessories, aircrafts, ships and boats, synthetic fiber, artificial yarn, fertilizers, insecticides, plastic materials, and rubber crude, tires and tubes.
During 7MFY13, the oil import bill recorded a YoY growth of 87bps to reach $8.84 billion, constituting over a third of total imports. While the shipments of POL products have rebounded in January, their seven-month tally shows negative growth due to lower shipments recorded in earlier months this fiscal. Meanwhile, crude oil imports have kept on growing due to increased processing and output from local refineries.
Fertilizer imports declined by 58.2 percent, for only 0.77 million ton of the product was shipped into the country during the period under review. That is explained by the lower buying by the Federal Government this season compared to last year. That saved the country nearly half a billion dollars in precious foreign exchange.
Going forward, export growth is going to depend on the scale of production by the leading exporting industries, especially textiles. Recent resurgence in cotton futures, due in part to the decrease in cotton plantation area in the US and strong buying from China, may help Pakistani exporters fetch better prices in the short-term, but the surplus cotton forecasts may keep this spike from turning into a trend.
Meanwhile, crude oil futures are portraying a stable price outlook, which may help Pakistan rein in its trade deficits in coming months. However, there is a possibility that an uptick in the imports of various items, which have seen quantitative declines thus far, might upset this equation.
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Pakistans Foreign Trade (snapshot)
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January FY13 Jul-Jan FY13
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Total % chg $ % chg in Total % chg % chg in
(mn $) Y/Y Qty Y/Y (mn $) $ Y/Y Qty Y/Y
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Exports 2,023 5.58 - 14,068 7.24 -
Rice 246 28.47 14.06 1,054 (5.58) (16.77)
Cotton Yarn 154 -1.75 -4.42 1,248 32.44 41.58
Cotton cloth 207 16.61 -21.22 1,496 12.16 (5.31)
Knitwear 160 5.45 29.97 1,208 0.92 4.00
Bed wear 151 22.14 30.76 1,022 (3.80) 2.78
Towels 69 39.01 44.47 445 18.02 24.40
RMG 161 10.41 12.11 1,056 12.51 12.01
Imports 3,763 3.12 - 25,685 (2.44) -
Petroleum products 692 -3.52 8.42 5,615 (4.24) (5.36)
Petroleum crude 450 2.61 2.01 3,227 11.20 16.61
Trade Deficit (1,740) 0.40 - (11,617) (12.05) -
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Source: PBS
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