Trade mired in tumbling volumes

Trade statistics released by the FBS for 5MFY12 reiterated the grave scenario of Pakistans trade, particularly exports, with volumetric exports of major commodities withering away. Take the case of rice. The commodity witnessed a whopping 34 percent, year-on-year decline in quantity exported in 5MFY12, even though the average price bagged per unit of the commodity was higher. While the higher export prices of rice are attributable to a surge in rice prices globally - thanks to floods in Thailand and the countrys rice programme (buying rice above market rates), - exporters claim competition from cheaper Indian rice, and post-flood crop losses rendered it difficult to export sufficient quantities from Pakistan. As for textiles, exports slid year-on-year in 5MFY12 for major categories such as cotton yarn, and finished products, with only marginal increases seen in the raw cotton and cotton cloth category. Prices of major textile products such as knitwear, bed wear and towels showed considerable increases. Yet, despite the increase in per unit prices of major textile products, the decrease in quantity was quite significant, bringing down overall exports of this category in rupee and dollar terms. Given that prices of raw cotton are on a slide internationally, and that textile products follow global cotton prices after a lag, price reduction in value-added textile products is likely on the cards and, coupled with the declining trend in export volumes seen, the picture seems appalling for the major export group of the country. Even sports goods, another key export area for Pakistan, witnessed dwindling export volumes in 5MFY12 relative to 5MFY11, supported only by higher prices, especially of footballs, registering, overall, nearly no change in net export in rupee terms. Even leather, the other strong arm of Pakistans exports after textiles, witnessed year-on-year decrease in quantities exported during 5MFY12, in particular of tanned leather and leather garments. Once again, an increase in prices supported the net increase in exports of tanned leather, while leather garments showed an overall decline despite an increase in average per unit prices. A commodity worth mentioning this fiscal year was wheat, the exports of which made a comeback after no exports in FY11. This is attributable to excess production during the last fiscal year and the built-up pf procured carry-over stock, which was exported to avoid damage. Overall, the country exported $9.4 billion worth of goods in July-November 2011, an increase of more than 9 percent over the same period last year. On the imports front, the quantity of crude petroleum decreased while that of petroleum products increased by roughly 24 percent in 5MFY12, reflecting on inefficiencies of refineries in Pakistan in importing more of the finished product rather than refining of the crude product. In general, despite the fall in quantities of crude oil imported, net imports of the petroleum group increased by over 50 percent - an obvious hit on the countrys trade balance. As a whole, Pakistans imports rose by over 20 percent to $18.5 billion in 5MFY12 relative to 5MFY11. The volumetric decline in exports remains a cause for concern for the country, as do the prices of petroleum products. Unless a major shift in these is witnessed, the countrys trade account is likely to bear the brunt.

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Selected trade commodities: Jul-Nov FY12
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                         Y/Y change in      Y/Y change in
                         quantity (%)    average per unit
                                                price (%)
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Exports
Rice                        -34                        33
Raw cotton                  -12                         0
Cotton yarn                 -11                         4
Cotton cloth                 -8                         8
Knitwear                    -17                        10
Bed wear                    -22                        36
Towels                      -13                        34
Footballs                    -3                        20
Leather tanned               -8                        30
Leather garments            -13                        14
Imports
Petroleum products           24                        37
Petroleum crude             -20                        50
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Sources: FBS, BR Research