The foreign trade statistics are presenting a rosy picture. The latest data released by the Pakistan Bureau of Statistics (PBS) shows that Pakistans trade deficit had declined by 10 percent year-on-year to settle at $13.1 billion for the eight-month period ended February 2013.
There has been a five percent rise in exports and a lesser, but no less significant, 2.4 percent drop in imports on YoY basis. During this period, the exports gained mostly on the back of growth in export categories like foods (through items like sugar, meat, spices, vegetables and fish), textiles, and other key items like electric fans, jewellery, and cement.
As usual, the export growth was led by the textiles sector, which contributed nearly $8.5 billion dollars to the total exports tally, showing a 6.5 percent growth YoY. The buoyancy of the sector during the year has been maintained by the cotton yarn exports, which fetched $1.43 billion during 8MFY13, showing impressive gains in terms of both volume and value.
Cotton yarn exports showed healthy gains in February, too. The demand for yarn by textiles mills in China, who happen to be behind the robust growth in this low-value-add item sourced from countries like Pakistan, India and Vietnam, is expected to continue in the future.
The value-added textile segment showed all-round gains during the eight-month period, except for bedwear which registered a small quantitative drop due to regional competition. Industry participants contend that the future growth in value-added textile exports from Pakistan depends on the extent of natural gas supplied to the industry. Gas availability was reported to be better during most of the first half of this fiscal year, but later, it worsened.
Sajid Saleem, Chairman, Pakistan Readymade Garments Manufacturers & Exporters Association (PRGMEA) told BR Research that the value-added textiles exporters have done well, yet they could do much better if enough gas was supplied to the industry in the preceding months. He noted that the garment manufacturers have, in recent times, turned down export orders despite having adequate capacity because of limited availability of natural gas.
"Besides the issue of inadequate gas supply, now cotton fabric, a major raw material, has become costlier, which will impact the industrys exports in coming months (evident in February exports). Government should move fabric imports from the difficult-to-comply DTRE scheme to the SRO-592, so that the industry can easily import cheaper and better quality fabric. It will increase the industrys production and exports," he said.
Food group has steadily supported the export growth throughout the year. It earned nearly $3 billion during 8MFY13, showing a 9.2 percent increase YoY. Rice is a large ticket item in this Group, but it showed quantitative and value declines during the period, primarily due to lower Basmati variety exports. A change of fortunes is expected as rice exports may pick up in later months of the year, due to increased supply.
Imports clocked in below the $30 billion-mark in the period under review, with a slight decline YoY. The items which registered notable declines in these eight months include the imports of dairy products, spices, pulses, power generation machinery, textile machinery, CKD motor cars and motor cycles, auto parts, POL products, synthetic fiber and yarn, fertilizer, plastic materials, rubber crude, tires and tubes.
However, various products showed quantitative increases during the period, lessening the impact of declines in above-mentioned items. These included telecom imports (mobile phones and telecom apparatus, which cost over a billion dollar in these eight months); CBU buses, trucks and motor cars; raw cotton; iron and steel; and gold.
The major component of imports, the petroleum imports, stood at $9.79 billion during 8MFY13, showing a slight value decline of 1.44 percent YoY. Shipments of petroleum products declined during this period, while the crude oil imports grew in double-digit. According to Nauman Khan of Topline Securities, both these items are inter-linked.
"Increased refining activity locally during this period meant more demand for imported crude, as well as more supply of POL, at home. Meanwhile, PSOs liquidity issues due to the circular debt problem impacted its ability to import the POL products. Therefore the crude oil imports have been higher, while POL imports have been lower during the period," he observed.
Meanwhile, the fertilizer shipments dropped during the period by 57.3 percent in quantity and 51.9 percent in dollar value, saving the country foreign exchange worth nearly half a billion dollars, courtesy limited imports ordered by the Government during this fiscal year.
The recent surge in international cotton prices and forecasts of only range-bound movement in crude oil prices in the near-term, augur well for the countrys trade balance in the future. However, that equation is dependent as much on the extent of energy supplies as to the key exporting industries in coming months.
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Pakistans Foreign Trade (snapshot)
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February FY13 Jul-Feb FY13
Total % chg % chg in Total % chg % chg in
(mn $) $ Y/Y Qty Y/Y (mn $) $ Y/Y Qty Y/Y
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Exports 1,835 -8.71 - 15,883 4.99 -
Rice 185 -9.79 -23.53 1,240 (6.13) (13.54)
Cotton Yarn 184 19.78 19.00 1,438 31.27 38.71
Cotton cloth 204 1.02 -30.29 1,717 11.77 (4.57)
Knitwear 139 3.01 8.27 1,362 2.29 3.36
Bed wear 131 4.48 8.43 1,153 (2.88) 3.29
Towels 57 -5.63 -11.87 505 15.56 22.25
RMG 131 -2.72 -7.67 1,168 8.76 8.55
Imports 3,383 -2.28 - 29,069 (2.41) -
Petroleum products 611 -4.64 -0.34 6,232 (4.19) (6.32)
Petroleum crude 335 -36.87 -35.89 3,562 3.77 10.19
Trade Deficit (1,548) 6.61 - (13,186) (10.05) -
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Source: PBS