Trade deficit declines in November

As per the data compiled by the Pakistan Bureau of Statistics (PBS), Pakistan’s export shipments in November registered a voluminous YoY growth of 23.68 percent, while imports went down by 2.33 percent, leading to a nearly 21 percent contraction in trade deficit. Consolidation with reduced trade deficits of prior months led to a nearly 10 percent YoY narrowing down of the 5MFY13 trade deficit.
The textile group exports showed a YoY value growth of 23.5 percent during November, but fell by 10 percent over October owing to markedly lower shipments from the value-added sector. The cotton yarn segment led the growth. Besides the YoY gains in November, the yarn exports also recorded month-on-month growth of 12.76 percent in value terms and 12.37 percent in quantity shipped over October.
The 5MFY13 yarn exports totalled 896.4 million dollars, a YoY growth of 52 percent in volume, 38 percent in dollar value and 50.8 percent in rupees. The yarn export momentum is fuelled by demand from the Chinese textile mills that prefer overseas yarn over the domestically produced fiber that is often high-priced due to the domestic market conditions.
With no import quotas in place yet and limited scope of basic textiles manufacturing in China, the duty-free imports are expected to continue, favouring this low-value added product’s exporters from countries like Pakistan, Vietnam and India. However, as a policy measure to shield its industry from overseas yarn supply disruptions, China is now reportedly encouraging the use of manmade fibers over yarn.
The double-digit YoY growth in the value-added textile segments in November is compatible with the healthy growth trends seen in earlier months this fiscal, thanks to a relative easing of the energy crisis for the industry this season. Exporters of value-added textiles seem to have put on a good show for the holiday season quarter in the Western markets.
The food group exports fetched higher dollar proceeds in November, showing an increase of 17.5 percent month-on-month and 34.2 percent YoY. Rice exports finally picked up during the month, as the quantity shipped rose by almost 54 percent over October and 4.34 percent over November last year. Besides, the higher exports of sugar and meat products also contributed to the food group tally.
The petroleum group imports reached 1.179 billion dollars in November, registering a 6.7 percent drop over October and an 8.47 percent decline over November last year. This is primarily due to a significant slump in POL import shipments. The petroleum crude shipments went down by 16.8 percent month-on-month, presumably due to higher purchases in October in lieu of increased refining activity.
For the July-November period, the oil import bill stood at 6.44 billion dollars, which is 2.28 percent higher in dollar terms YoY, but 11.85 percent greater in rupee terms, showing the impact of rupee depreciation in last five months.
The forex spent on fertilizer imports registered a nearly 30 percent YoY drop in November. The July-November fertilizer imports stood at 315.5 million dollars, which exhibits a YoY decline of 50.7 percent in volume and a 46.8 percent dip in value. The government hasn’t imported urea this season on the scale seen last season – the demand is said to be dull even as ample urea inventory is available in the country.
The growth momentum in the value-added textiles is said to be dependent on gas availability in coming months. The furnace oil demand is expected to remain strong for electricity generation and the demand for petrol due to limited CNG availability is also expected to increase. However, oil prices are largely expected to remain range-bound owing to fundamental oversupply estimates, taking care of any near-term fluctuations in the aftermath of the US fiscal cliff.

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FOREIGN TRADE (SNAPSHOT): NOVEMBER FY13

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                     Total       % chg    % chg in

                     (mn $)      $ Y/Y     Qty Y/Y

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Exports              1,896       23.68           -

Rice                   165       21.09        4.34

Cotton Yarn            192       41.32       48.16

Cotton cloth           204       38.07       26.47

Knitwear               145       30.51       18.18

Bed wear               128       14.60       21.86

Towels                  54       52.37       47.69

Readymade garments     149       17.80       20.92

Imports              3,607       (2.33)          -

Petroleum products     735      (19.28)    (33.02)

Petroleum crude        444       17.60       36.31

Trade Deficit       (1,711)     (20.79)          -

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Source: PBS.

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