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“Looking ahead, the current account deficit is expected to decline through the remainder of FY22, as import growth slows in response to a normalization of global commodity prices…….” reads an excerpt from the January Monetary Policy Statement by the central bank. Meanwhile, Brent crude has touched $90/bbl since – highest in over four years. Palm oil prices recorded the highest ever value at the close of last week, having increased 7 percent in less than a month.

The statement also sees signs of “encouragement” in “imports excluding energy and vaccines” having “stabilized in the last two months.” While true, there is little point finding solace in import growth momentum slowing down in two of the most critical import categories. Pakistan’s energy needs are only growing, and the price side of the equation has more chances of going against, than in favor, for the rest of the fiscal year.

Similarly, there is nothing one-off about vaccine imports either. Pakistan has vaccinated a little over one-third of its eligible population. At the current rate of inoculation, the country would still need to arrange for vaccines for at least 12 more months. So, while non-energy non-vaccine current account likely surplus may look all fancy on the power point templates, it will have little impact on the ground reality. The post MPS presentation also continues with the narration that “70 percent of the increase in the import bill in H1-FY22 is estimated to stem from prices”.

This time around though, it does not become part of the statement itself, as the analysis is based on c. import volumes 47 percent of the overall value. The communication acknowledges the fact that the quantum effect would be higher for the other 53 percent, as machinery and transport groups have reported significantly higher growth. These are not necessarily driven by commodity prices, and it is fair to assume that the bulk of increase is volume driven.

Recall that last month, the Pakistan Bureau of Statistics (PBS) released data on volume and unit prices of entire imports till 1QFY22 (read: Imports driven by volume, not price, published Jan 04, 2022). That showed the quantum index of imports had registered a growth of 57 percent versus 22 percent growth in price index of imports. And if half the imports are price driven to as much as 70 percent, the other half surely is all quantity driven – so much so that it reverses the equation for overall imports to volume driven.

On a side but equally important note: unavailability of timely data to an institution as important as the SBP remains baffling. The PBS is surely in possession of volume data for all imports, even though that does not become part of monthly releases for whatever reasons. You may not want to make the data public for all and sundry, but surely there could be an arrangement made with the central bank of the country, where data-driven decisions are of paramount importance. Whether the central bank’s response would have been any different, with the complete picture available, is debatable – but it should at least have access to data that more often than not becomes the basis of the policy decisions.


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