At the mercy of crude

Decoupling may be the order of new financial world, but oil importing developing countries such as Pakistan cannot divorce an inch from away it.
Although, trade gap for the first four months has declined by 41 percent year-on-year basis with 26 percent fall in imports, a closer look at numbers reveals initial signs of a change in direction.
Its good to see that for the first time this fiscal year, exports increased over the same period last year, its equally worrying to note the slowing pace of decline in import bill, which increased 23 percent month-on-month.
In the absence of detailed data, yet to be released by the statistics department, a relatively low base effect last year, when Pakistans economy was in shambles and gradual stability are likely reasons behind the widening gap last month.
One answer could be a mere accounting treatment considering that oil imports in September were roughly $100 million less than the monthly average which led to relatively higher oil imports in October. The other answer could be the sharp 7 percent hike in international oil prices during October amid 30 percent year-on-year increase in oil consumption.
High furnace oil consumption owing to partial resolution of circular debt has been inducing industrial oil demand in the last couple of months. Now with the global recovery in oil prices amid expectations of further northward movement, the possibility of rise in monthly import bill may be higher in the coming months, albeit, with some fluctuation on monthly basis.
The signs of global economic recovery are visible in Pakistans exports which grew 8 percent in October year-on-year bucking the declining trend in the last many months. Although, in the absence of breakup, one can only guess that our textile exports are picking up this month, the upcoming winter season amid global stimulus package promises a positive momentum ahead.
On the flip side, the stabilization in local economy and the likely monetary easing later this month may induce some import demand in the coming months. It is interesting to see the trend of non-oil import bill in the last month and coming few months, which declined by 20 percent year-on-year in the first quarter of this fiscal year. While this means better trade balance, this also means that corporations aren investing enough in the long term.