February 7, 2019: Pakistan’s non-energy imports amounted to $10.4 billion during the first quarter of fiscal year 2018-19 (Q1-FY19), showing a decline of 5.3 percent as compared to the imports of corresponding period of last year. The broad-based decline was led by lower purchases of machinery during the period,” said State Bank of Pakistan (SBP) in its first quarterly report on state of Pakistan's Economy.
The report added that with the completion of many early-harvest China Pakistan Economic Corridor (CPEC) projects, purchases of foreign power generation and electrical machinery have declined, along with Foreign Direct Investment (FDI) inflows in this sector from China.
At the same time, transport imports dropped 17.4 percent to $790.9 million in the quarter while a sizable 35.9 percent decline was noted in car CBU (Completely Built Up) imports, as additional customs duty was imposed on vehicle imports in the budget 2018-19, and the government decided to ban non-filers from purchasing cars.
Meanwhile, imports under the ships and aircraft category were also lower than last year, mainly due to a low-base effect while further relief came from the low international prices of palm and soybean oil, which reduced the import values of these two commodities during Q1-FY19, the report added.
In the case of palm oil, a build-up of inventories in the second-largest producer Malaysia, coupled with the ongoing slump in the Malaysian Ringgit against the US dollar, led to a drop in its international prices.
According to the report, this drop encouraged edible oil mills in Pakistan to purchase higher quantities while the prices were low.
As a result, even though quantum palm oil purchases went up 12.8 percent, its import values declined 4.8 percent to $485.7 million in Q1-FY19. Similarly, lower international prices of soybean oil kept its import values in check, though quantum imports of the commodity were also lower as compared to the same period last year.
Meanwhile, the cumulative quantum imports of iron and steel dropped 5.9 percent in the quarter due to a general slowdown in construction activities in the period. This was also reflected by lower domestic cement dispatches and steel production during the period. Due to lower quantum, the import values of these items dipped 2.3 percent from last year.
On the other hand, upward pressure in the non-energy imports came particularly from coal, which is classified under “all other items” under both SBP’s and PBS’ trade data.
Coal imports stayed elevated as the international prices reached their highest levels since April 2012; average coal prices were 23.7 percent higher on YoY basis in Q1-FY19.
Besides, the demand for coal from the power and cement sectors remained strong, putting further upward pressure on its imports, it said adding that as a result, coal import payments surged 120.1 percent YoY and reached $464.3 million in the quarter.
Meanwhile, fertilizer imports grew 49.6 percent and reached $344.2 million, as domestic production declined by 5.1 percent during Q1-FY19.
Local production was down as three fertilizer plants shut their operations amid gas supply issues.
Going forward, the report added, the fertilizer imports would stay elevated, as the government had allowed the import of 100,000 MT of urea to offset domestic supply shortages in the current cropping season.
Besides these items, import demand for raw materials of the textile industry also stayed strong, as the industry tried to maintain its export growth momentum. Raw cotton imports surged 86.4 percent to US$ 65.2 million as the industry procured the material from abroad in the wake of lower expected cotton production.
Imports of high staple cotton, used primarily to make export-quality garments, also continued. At the same time, import values of synthetic fibre and of chemicals used to make man-made fibres also went up, following the rising trend in their international prices as well as the local textile industry’s efforts to catch up with the changing global clothing trends.