EDITORIAL: Pakistan’s import bill rose by 64 percent to 25.1 billion dollars in four months (July-October) against the comparable period of the year before according to a written reply submitted by the Commerce Ministry to the Senate in response to a query by a ruling party lawmaker Zeeshan Khanzada, adding that “the increase in import is mainly due to a substantial increase in the prices of oil, gas, coal and food commodities in the international market” as well as import of Covid-19 vaccine — essential items.
In this context, it is also relevant to note that Razak Dawood, Advisor to the Prime Minister on Commerce, is on record for resisting taking ownership of the rise in imports on the plea that the bulk of this rise is beyond the purview of his ministry. However, one may assume that he is perfectly willing to take ownership of the increase in import of capital goods, raw materials and intermediate goods which would fuel productivity and growth.
Two facts need to be brought to the attention of the Commerce Ministry. First, more up-to-date data (up to November) is available on the State Bank of Pakistan’s website, which shows that imports (July-November) have risen to 29.9 billion dollars (a further 19 percent rise), which requires emergent remedial measures.
The rise is attributable to (i) petroleum and products, which comprised the largest import item (including crude, natural gas, liquefied, etc) accounting for 7 billion dollars July-November (24 percent of total imports); (ii) agriculture and other chemicals at 4.3 billion dollars though the largest increase under this head was in plastic materials — from 254,917 thousand dollars in October to 354,795 thousand dollars by November (14 percent); and (iii) food group at 3.3 billion dollars wherein wheat/palm oil/sugar/pulses registered a decline in November imports compared to October — from 708,662 thousand dollars in October to 704,883 thousand dollars in November (11 percent of total imports). The remaining about 50 percent of imports are accounted for by machinery group at 3.8 billion dollars (13 percent) followed by metal group at 2.5 billion dollars (8.6 percent), and textiles at 2.29 billion dollars (7.8 percent).
A more relevant comparison maybe to 2017-18 which indicates that fuel accounted for around 19 percent of total imports (around 5 percent lower than during the first five months of the current year) while machinery accounted for around 15.6 percent of total imports (or around 2 percent higher). While globally prices have been rising attributed to the disruption of supply chains as a consequence of the lockdown yet there is a need to also take account of the sustained rupee erosion in recent months (post-May 2021) which, as per Shaukat Tarin, the de facto Finance Minister, should be around 164 to 165 rupees to the dollar instead of at around 180 rupees.
And second, what is equally critical is to note that the rise in our exports, which remain largely traditional items, are mainly not due to higher value addition which one would have hoped for given the claim of the government that the rise in capital goods/machinery imports will fuel exports, but due to the rise in global prices. In short, while the pandemic associated rise in prices has increased our import bill it has also contributed to a significant rise in our exports.
Last but not least, for the Advisor Commerce/ministry to selectively acknowledge responsibility for only the positive indicators is not appropriate. Cabinet members must learn to bear collective responsibility because decisions taken by one will impact on the functions of others. In addition, the cabinet must take very serious note of the fact that during the first five months of the current fiscal year the trade deficit at 29 billion dollars compares with the trade deficit it inherited of an unsustainable 30 billion dollars, which in turn led to serious current account deficit issues.
The time for mitigating measures is at hand and the need is to identify and implement import substitution policies proactively.
Copyright Business Recorder, 2021
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