ISLAMABAD: The Pakistan Business Council (PBC) has said that measures like tariffs and LC margin calls will raise the cost of inputs and slowdown the economy.
The PBC has made these observations in its analysis of import data released by the Pakistan Bureau of Statistics (PBS) for the period July-August 2021 which reported total imports at $12.17 billion - an increase of $5.17 billion or 74.09 percent over the same period in 2020.
While this increase is significant, it is important to break this number down to better understand the contributing factors behind this increase in imports.
Based on import data as reported by the PBS, the PBC objectively analysed the increase in Pakistan's imports for the period July-August 2021 with comparable periods in 2020 (Peak-Covid) and 2019 (Pre-Covid).
Total imports, PBC maintains, increased primarily due to increase in global commodity prices. Large part is due to global demand escalation and supply chain disruption as the world comes out of Covid.
Commodity cost inflation, it further argues, is not controllable though paying for it poses a problem. Global demand escalation and supply chain disruption caused by container shortages are mainly responsible for escalation in costs.
Some of the import increase is due to food and agricultural shortages. Imports for these are unavoidable for reasons of food security, checking domestic inflation and securing inputs for textile exports. Reviving agriculture output is the sustainable solution. TERF-led higher machinery imports will pave the way for increase in exports. Developing indigenous sources of energy is a longer-term substitute for imports.
Import of buses and trucks is necessary to address needs of passengers and cargo transportation.
Import of cars in CKD/SKD allows for local value-addition. Knee-jerk & sweeping measures such as tariffs and LC margin calls will raise the cost of inputs and slow down the economy. According to PBC, increase in duties on Food Group (palm oil, pulses, soya bean oil, and sugar) is also a factor in higher domestic prices. For example in spite of a sugar shortage in the domestic market tariffs are high on import of sugar.
Increase in imports of palm oil and pulses are mainly due to rise in their international price.
The PBC further contends that tariffs and LC margin calls on Textile Group (raw cotton, synthetic fibre, and synthetic & artificial silk yarn) and medicinal products will result in fuelling inflation.
Raw cotton imports have increased mainly due to rise in demand. Price of synthetic & artificial silk yarn has decreased while demand has increased, leading to increased imports of the commodity.
PBC has suggested that the government reviews its pricing policy for petroleum products to encourage conservation; and recommended that the government avoids tariffs on machinery, cars and buses and additional tariffs on iron & steel will increase cost of construction inputs. In case of iron and steel, increase in volume outweighs increase in prices, leading to increase in imports. Increase in price outweighs the increase/decrease in volume, leading to an increase in total imports.
While commenting on less essential items, PBC proposed that import of cars in CBU form may be checked.
Prices of medicinal products have increased immensely, which has increased their import value. Demand and price, both have increased for plastic materials.
Copyright Business Recorder, 2021