Exports refuse to rise

Imports continue the journey south – hitting a 30-month low of $4.1 billion in March 2019, registering a 21 percent year-on-year decline. Imports are not the only ones that have tapered off of late, exports too have been softening – for four straight months now – recorded at $1.98 billion going down by 11 percent year-on-year. The provisional numbers released by the Pakistan Bureau of statistics (PBS) show the trade deficit for March 2019 went down by 28 percent year-on-year.

The 8M numbers show imports down by 8 percent year-on-year, while growth in exports has virtually flattened. Much of the import slowdown is attributed to the economic slowdown which is becoming ever so apparent and most estimates now show that Pakistan’s economy is likely to grow by no more than 3-3.5 percent for the next two years.

The drop in monthly machinery imports from an average $1 billion in FY18 to $740 million in 8MFY19 has played a key role in overall imports slowdown. The reduced reliance on furnace oil, and increased generation from RLNG and coal have also reduced the overall energy import bill – and is likely to slowdown further, given more RLNG and coal plants to come online in the near future – should international oil process do not decide to go berserk.

The export performance should now start to become a worry for Islamabad – if it was not already. Granted that for exports to yield the benefits given in the form of reduced energy prices, settlement mechanism for refunds, and more importantly the massive currency depreciation – one may want to wait a bit longer. But the positives in favour of the export sector should have at least started to give a better direction, which has not been the case. Worse still, the demand drop in Pakistan’s major exporting destinations of Europe dank the USA has come at the wrong time – limiting the potential to milk optimal benefit of rupee depreciation.

That said, things may be looking up for the high margin segments within the textile sector – as both the readymade garments and knitwear have shown double digit volumetric growth of late. But this alone, would not arrest the slowdown in overall exports. An immediate revival in demand from Europe and USA does not seem on the cards. This could well be time enough for the export industries to up the game, and try and cover the lost ground on value addition.