An unusual high import bill was expected months ago and even predicted by Asad Umer, however this is temporary and will ease. On the plus side the factors contributing to this increase have potential to give good benefits to people of Pakistan. Two main factors for this increase.
1. High food import bill, to fix the mess by Wheat/sugar etc mafias. We are surplus producers but until last year we had a tendency to over export, depleting required reserves because of incorrect data mechanism. Gov is making measures for food security. Impact of this will have effect in next year as prices for consumers will be more stable. The reserves also account for Afghan population in Pakistan and needs strict control of smuggling to Afghanistan, where its more profitable for traders.
ISLAMABAD - Pakistan’s food import bill is continuously increasing mainly due to the massive import of the wheat and sugar to bridge the shortfall in
nation.com.pk
2. Industries are expanding and a high percentage of import bill is machinery for which gov is giving concessions. This will create jobs and increase production/export in coming years.
PAKISTAN’S trade deficit expanded by almost 33pc to $30.8bn during the last fiscal from $23.2bn a year before...
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Regarding remittances, there is a plan in motion for increased public private partnerships, tapping in overseas Pakistani's instead of international lending organizations. If that mechanism works it would be win win for all. Other avenue where attention is being given and can increase exports without importing machinery is services sector and as always software industry is being promoted. This year there have been unprecedented fund raising for startups as this industry can continue work under lockdowns. I'm optimistic that positive results of this will show up in couple of months.
Swelling import bill
EditorialPublished July 5, 2021
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PAKISTAN’S trade deficit expanded by almost 33pc to $30.8bn during the last fiscal from $23.2bn a year before because of a hefty growth in imports. The country’s trade gap has been widening since December. Imports are on the increase, surging by a cumulative 26pc through the year to $56.1bn from $44.6bn. This was expected because of the poor wheat, sugar and cotton harvests last year. The rapid increase in machinery imports as a result of the availability of substantially subsidised long-term finance for new investments and the replacement of outdated technology is another factor pushing imports. In addition, rising global commodity prices on the back of a surge in demand as the world limps towards some kind of normalcy has also contributed to an increase in the import bill. In comparison, the nation’s exports have grown by just 18.2pc to $25.3bn from $11.4bn. Even though the country has achieved its highest ever export revenues — the last time Pakistan fetched more than $25bn in export dollars was in 2014 — the performance is not that encouraging when considered in terms of GDP or the size of the economy. The nation’s exports remain less than 8.5pc of GDP calculated to be around $296bn. This compares with Bangladesh’s exports that constitute more than 15pc of its GDP. Pakistan had achieved its highest ever export-to-GDP ratio of 12pc in 2011 before bottoming out to around 7.5pc in 2017.
The mounting trade deficit can be a major challenge for the county’s feeble external sector. The expanding gap in what we purchase from the world and what we sell to them has already eroded the current account surplus posted in the first five months of the last fiscal year. The trend is likely to persist in the present financial year as the government targets GDP growth of 4.8pc or more. Imports are anticipated to increase even faster during this year while exports are unlikely to keep pace with them. That is likely to put pressure on the State Bank’s meagre foreign exchange reserves. Last year, the Covid-19 pandemic had provided a cushion to the external account as we saw unprecedented growth in remittances sent home by Pakistanis working abroad because of restrictions on international travel, which helped the central bank finance surging imports and reduced the pressures on the country’s balance-of-payments position. With the world getting vaccinated and slowly returning to normal, the remittances bonanza is unlikely to continue for too long, thus depriving the government of a major source of financing imports.
So how does the government plan to finance spiking imports — or current account deficit — in a world that is learning to live with the coronavirus? Unless it has a plan to push exports more vigorously and pursue non-debt-creating foreign direct investment, it may see foreign exchange reserves erode in the short to medium run and foreign debt mount even more rapidly.
Published in Dawn, July 5th, 2021
