Never have Pakistans exports been more in a single month than they were in October 2010, nearing the record high $2 billion mark. But even the record high exports could not bring down the trade deficit which has now exceeded $5 billion during Jul-Oct FY11 - a 14 percent increase over the corresponding period of FY10, according to FBS data.
The exports were expectedly driven by the textile sector contributing 60 percent to the total. The textile sector also achieved a landmark as it hit the billion dollar mark in October, which is the first such instance in its history.
Textiles superior performance though, is not a result of a sharp increase in productivity or value addition, but simply a reflection of massive increase in global cotton prices that aided the export revenues, coupled with the seasonal Christmas buying season.
The commodity price increase was not unfortunately restricted to cotton alone, as the import bill clearly shows the signs of higher oil prices that fuelled the oil import bill. Despite importing lesser quantity of oil during 4MFY11, the dollar value remained on the higher side as average oil prices were up 8 percent year-on-year.
So what will become of the trade balance now? There is a strong likelihood that the exports for November, particularly that of textile might create a new monthly record. However, with Christmas buying season likely slowing down, December might see fewer textile orders, almost coinciding with the correction in cotton prices.
Cotton prices have been tapering off following the tightening in China and India owing to which the value of Pakistans exports can be expected to ease accordingly. But there is another worrisome factor: that the eurozone might witness another round of crises in the wake of Irish debt woes.
With Ireland, Spain and Portugal in the queue of seeking bailouts, the EU market, which is a sizeable export market for local textile makers, could squeeze demand and with it, the benefits of higher cotton prices. The agriculture output too, may not be optimal due to the floods, which may significantly hit Pakistans second most important export, rice.
With the winter season starting, petroleum imports may be on the rise, as shortage of gas availability will force power producers to burn more furnace oil for electricity generation. To top it off, the EIA expects the global crude oil price to remain above $85/bbl for the next six months - so there seems to be no respite in the offing for the trade balance.
Comments
Comments are closed for this article.