External Sector in Pakistan 2

Table-8: Structure of Imports ($ Million)
		July-February				Absolute Increase	% Cont. of absolute increase
	Particulars	2007-08	2008-09		% Change
	Total Imports	24,137.9	23,770.5		-1.5	-367.4	100.0
A	Food Group	2,511.3	2,749.6		9.5	238.4	-64.9
	Wheat Unmilled	369.0	838.0		127.1	469.0	127.7
B	Machinery Group	3,497.9	3,698.0		5.7	200.1	-54.5
	Power Gen. Machine	647.9	1083.1		67.2	435.2	-118.5
C	Petroleum Group	6,340.2	6,921.2		9.2	581.0	-158.1
D	Textile Group	1604.7	1037.4		-35.4	-567.3	154.4
E	Agri Chemicals Group	3,653.6	3,528.9		-3.4	-124.7	33.9
	Fertilizer	625.5	365.7		-41.5	-259.8	70.7
F	Consumer Durables	3,259.2	2,026.5		-37.8	-1,232.7	335.5
	Road motor Vehicles	855.8	622.8		-27.2	-233.0	63.4
G	Telecom	1,427.9	716.3		-49.8	-711.6	193.7
H	Raw Materials	2,192.2	2,096.3		-4.4	-95.9	26.1
I.	Others	1,862.4	2,165.0		16.2	302.6	-82.4
	Non-Food, Non-Oil	15,286.4	14,099.7		-7.8	-1186.7	258.1
	Non-Oil Imports	17,797.7	16,849.3		-5.3	-948.3	323.0
				Source: FBS

Notwithstanding the recent dramatic fall in the prices of crude oil in the international markets, the petroleum is still depicting positive growth of 9.2 percent and adding $581 million to the additional import bill over last year’s petroleum import. The monthly import bill on account of petroleum has lost one-third of its value. The additional import bill during the period July-February 2008-09 on account of petroleum and wheat was just above the $1.0 billion. This massive addition is neutralized by massive negative contributions from non-food and non-oil imports. Other positive contributors to additional import bill are power generating machines which have added $435.2 million, agricultural chemicals other than fertilizer ($213.4 million), and electrical machines & appliances ($92 million). The non-food and non-oil imports showed negative growth of 7.8 percent which implies on drastic import compression.

The unit value of import of crude oil is still depicting 45 percent increase in the period July-February 2008-09. The unit value of soyabeen and palm oil are also showing massive increases of 62.9% and 22.8%, respectively in this period [See Table-8]. This clearly reflects the time lag involved in translating the benefit of lowering of prices in the international market into the import bill. The consumer durables, transport group and telecom sectors are responding positively to the import compression measures. The current growth in imports is coming from only a narrow range of products and corrective measures are needed accordingly in these items. Pakistan needs more measures to cut on its petroleum imports either through looking into alternative fuel sources or demand management. The import of edibles also needs to be looked into carefully and may be given priority for domestic substitution.

Trade Balance The merchandise trade deficit improved by 6.9 percent and declined from $12.5 billion in July-February FY08 to $ 11.6 billion in July-February FY09. The substantial decrease of 42.0 percent in imports outstripped otherwise significant decline of 17.9 percent in export growth, which caused the trade deficit to improve by 6.9 percent. This is the first ever improvement in the last three years or so.