5MFY19 – Exports round up

BR Research December 24, 2018

Exports and imports both have stagnated at around 1 percent growth YoY. Though the cooling down of imports has decreased pressure on the rising current account deficit, rise in exports is essential to bring it down to manageable numbers.

In terms of exports, textile sector wish list included devaluing currency and decrease in power costs. Given that their demands have been met to a large extent, the onus is on them to deliver through enhanced exports. Knitwear clocked in the highest increase in exports in dollar terms and is the only industry within the textile sector which is showing a positive trend for growth.

The food category generally propels exports with rice, sugar and wheat being the cornerstones. However, sugar and rice exports did not increase YoY along with fish and fish preparations and tobacco. Increase in exports of basmati rice could not compensate for the dip in other varieties, leading to an overall decline in rice exports.

Sugar exports halved compared to same period last year but can grow marginally since the government has allowed sugar millers another 100,000 tons of exports. Over same period last year exports of sugar had crossed 320,000 tons but are at 182,000 tons for 5MFY19. This indicates that sugar exports will remain below FY18’s numbers despite the allowance. Furthermore, ECC has refused to provide freight subsidy to millers for exports which will also contribute towards the dip.

Wheat registered the second highest increase in exports for the period only because its exports were restricted last year. Wheat’s numbers are being driven by August and September’s figures of around 200,000 tons respectively as exports were permitted to shed off surplus stocks. Exports have tapered off since then.

The government’s recent mulling to allow wheat exports have resulted in an approval of half a million tons. At roughly $210 per ton, as per PBS data, additional exports will result in about $105 million in the kitty.

Non-traditional exports such as petroleum products, plastic materials, and other chemicals did well though SME industries of sports goods and surgical goods & medical instruments declined.

Since the textile sector makes up 60 percent of total exports, in the short to medium term it has to be the main driver of growth. Depending on right policies, textile exports can grow by 50 to 70 percent to cross $20 billion in the next 3 to 4 years. (Read “Textile ready to take off” published on December 14, 2018). In the long run, other value added sectors have to expand so that all the exports eggs stop being in one basket.

Copyright Business Recorder, 2018

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