Analysis of Pakistan’s Import Data – Jul-Sept 2021

The PBC has analyzed the July-Sept 21 import figures released by the Pakistan Bureau of Statistics. We compared these with the same period last year (which was impacted by Covid) and the year prior to that (which was not affected by the pandemic). Would be grateful for appropriate coverage.

Imports rose by $7.5 Bn or 66% over the previous year. Alarming as it sounds, two-thirds of the $7.5 Bn increase i.e. $5Bn is on account of global commodity cost inflation which is outside Pakistan’s direct control and includes more expensive medicines necessitated by the pandemic. The remainder $2.5 Bn of increase is accounted for by higher import of machinery, transport goods and textile inputs. Much of machinery is funded by TERF and will lead to exports, whilst textiles includes cotton and synthetic yarn necessary for exports. The largest components of the increase in import within the Transportation Group is buses, trucks, ships, boats and cars in CKD/SKD form. Increase in import of cars in CBU form amounted to $56 Mn only.

The PBC continues to advise against knee-jerk & sweeping measures such as higher tariffs and requirement of 100% cash margins for LCs for import of industrial inputs. Regretfully, some items of industrial input have been included in the list and the PBC has requested SBP to remove then from the 100% cash margin requirement.

Right pricing of imported energy, a start on which was made last week, will help curb consumption. Higher tariffs on imports of essential items however, will further acerbate inflation and are not recommended. Fundamental reforms should promote indigenous and renewable energy and agricultural productivity to make the country more self-reliant. It should also broaden the basket and diversify the reach of exports to put some of the opportunistic shift of orders away from pandemic affected countries to Pakistan on a sustainable footing. This is part of the PBC’s Make-in-Pakistan thrust.

The following summarises our findings. The details are in the attached study.

• Global commodity price escalation largely responsible for an increase in total imports. Rest mainly on account of unavoidable and desirable imports
• Global demand escalation and supply chain disruptions caused by container shortages appear to be responsible for escalation in costs
• Some of the increase in imports is due to domestic shortages of food and agricultural commodities. Imports of these are unavoidable for reasons of food security, controlling domestic inflation and securing inputs for textile exports. Reviving agricultural output is the sustainable solution
• TERF-led higher machinery imports will likely pave the way for an increase in exports
• Developing indigenous sources of energy is a longer-term substitute for imports, pending which, right pricing imported energy will help curb consumption
• Import of buses and trucks is necessary to address needs of passenger and cargo transportation. Import of cars in CKD/SKD allows for local value-addition
• The PBC continues to advise against knee-jerk & sweeping measures such as an increase in tariffs and requiring 100% cash margins for LCs for import of industrial inputs
• The Monthly Quantum Index of Manufacturing is beginning to show signs of revival