Pakistans foreign trade had a favourable closing in the first-half of the ongoing fiscal. As per the data compiled by Pakistan Bureau of Statistics, the countrys trade deficit contracted by 14 percent YoY to come down to 9.87 billion dollars in 1HFY13. That happened due to a healthy mix of growth in export proceeds and decline in import payments. The December trade also contributed to the trend seen in prior months.
The half-yearly export gains of 7.58 percent have partly come from decent growth in the textile and food groups, and partly from the exceptional showing in jewellery and cement exports. Despite a meager rise in shipment quantity, cement exports increased by 30 percent in dollar terms over last year - thanks to recent improvement in margins owing to increase in retention prices and visible slump in coal prices.
Interestingly, the jewellery exports reached 1.1 billion dollars in 1HFY13, which is thrice the value seen last year.
The textile group exports grew 8.55 percent YoY to reach 6.45 billion dollars in 1HFY13. Among the performing items, the cotton yarn exports continued to show booming growth in December. Continued demand is seen from Chinese textile millers who buy cheaper yarn (over pricey domestic supplies) from Pakistan and other SE Asian countries, and blend it with high-priced Chinese cotton to remain competitive.
Free from quota limits and custom duties, Chinese yarn imports currently cost 160 dollars less per ton than the yarn that is produced in China, according to Reuters, which forecasts Chinese yarn imports to go up by a third in 2013. This is likely going to benefit Pakistani yarn exporters, who in the first six months have already exported 0.36 million tons of this low-value added item, fetching a total value of 1.09 billion dollars.
The value-added textile segment also posted healthy YoY growth in December as well as 1HFY13. The energy supply to the industry was initially satisfactory, but it has worsened since November, especially for Punjab-based units. Its impact on value-added textiles will be visible in coming months as the basic textile inventories stand almost exhausted in the wake of erratic fibre supplies from mills in central Punjab.
Sajid Saleem, Chairman, Pakistan Readymade Garments Manufacturers & Exporters Association told BR Research yesterday that the readymade garment segments average price improved during the first half this fiscal owing to significant buying from major brands like Levis and H&M. He noted that Pakistani RMG exporters were benefitting from duty-free exports to the EU, in segments such as ladies denim.
The EU duty-free access started in November last year, and remains effective till December 31, 2013. The EUs new Generalized Scheme of Preferences would come into effect from January 1, 2014, but Pakistan has to comply with some 27 international conventions to qualify. For continued market access, Sajid urged the government to not waste more time and prepare to file Pakistans application for the GSP+ status.
The export growth was also supported by the food group, which increased by nearly five percent YoY to reach two billion dollars in 1HFY13. The growth was supported by gains made in sugar, meat and meat preparation items, fish, vegetables, and miscellaneous food items. However, the rice exports declined by 26.7 percent in quantity, due to shipment declines in nearly all the rice varieties.
Imports stood at 21.9 billion dollars during the six-month period. The 7.5 percent drop in half-yearly imports was due to decline in a variety of items, such as palm oil, spices and pulses, power generation machinery, textile machinery, auto parts, CKD motor cars and motorcycles, synthetic fibre and synthetic yarn, fertilizers & insecticides, plastic materials, rubber crude, tires & tubes, and paper & paperboard materials.
The oil import bill stood at 7.69 billion dollars in 1HFY13, showing a nominal YoY growth of 1.15 percent in dollar terms. Shipment quantities declined for POL products during the period whereas crude import shipments rose due to increased refining activity at home.
Due to a mix of sufficient availability at home and fairly stable demand, the government imported significantly lesser quantity of fertilizer in 1HFY13 compared to previous year. Hence, the 1HFY13 fertilizer imports declined by 61 percent in quantity and 57 percent in dollar value, closing at 340.6 million dollars.
Two commodities that chiefly determine the size of Pakistans trade deficit, cotton and oil, are both in abundant supply globally. With crude oil expected to remain oversupplied in 1HCY13, overall import growth may remain under check. For export growth, it is important to provide maximum energy supply to the industries, besides ensuring that Pakistan makes efforts to be qualified for the GSP+ status.
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PAKISTANS FOREIGN TRADE (SNAPSHOT)
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December FY13 Jul-Dec 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 1,969 6.2 - 12,051 7.58 -
Rice 201 -4.14 -26.35 810 (12.33) (26.71)
Cotton Yarn 195 44.08 48.12 1,091 39.00 51.45
Cotton cloth 201 10.88 -21.26 1,296 12.08 (1.78)
Knitwear 166 13.85 16.04 1,047 0.19 2.73
Bed wear 142 7.79 11.05 871 (7.16) (1.41)
Towels 65 22.03 17.04 369 12.77 18.03
RMG 151 8.76 5.41 898 13.29 11.06
Imports 3,672 -13.82 - 21,922 (3.33) -
Petroleum products 754 -17.89 -22.38 4,920 (4.40) (7.35)
Petroleum crude 498 27.61 39.65 2,777 12.72 19.35
Trade Deficit (1,703) -29.25 - (9,871) (13.99) -
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Source: PBS
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