Trade deficit details: Energy crises the major reason

      Written as on June 21, 2012

Highlights

            •         Gas crisis a core reason for widen gap b/w imports and exports

            •         Energy shortage dented textile exports considerably

•         Outlook: FX Reserves depletion risk ahead

In today's Value Seeker, we present detail of trade account figures published by Pakistan Bureau of Statistics for Jul-May 2012 along with its outlook.

Gas crisis a core reason for widen gap b/w imports and exports

The impact of shortage of natural gas in the country has been gradually seen as a pinnacle factor for widening of trade deficit this year as substitution towards oil based products resulted in 5%YoY surge in oil import volumes to 17.5metric tons.   Also power shortage in the country  impacted the real sector of economy as major textile exports including Cotton Cloth, Knitwear, Bed wear and Readymade garments quantity declined by 12%YoY, 24%YoY, 19%YoY and 27%YoY respectively. The detailed trade figures for the 11MFY12 revealed by Pakistan Bureau of Statistics notify that the imports have grown significantly by 12%YoY to USD40.9bn, but exports remained subdued and decline by 4%YoY to USD21.5bn. Therefore, trade deficit of the country is depicting a 37% increase to USD19.4bn11MFY12. If we see month on month growth, exports for May 2012 have also reduced mere 3.6%MoM, while imports for the same month have increased with the same 3.6%.

Energy shortage dented textile exports considerably

On the exports side, overall textile exports which contain 52% in total exports has declined by 9.6%YoY to USD11.3bn during 11MFY12 compared to USD12.5bn during same period last year. The largest category under the textile exports head is cotton cloth, which hold 20% share in textile group and 10% in total exports, has declined by 3.1%YoY to USD2.2bn during the underlying period compared to USD2.3bn last year. Cotton Yarn also stood among the looser category in terms of percentage as it has denoted decline of 20%YoY to USD1.64bn. Moreover, bedwear, knitwear and readymade garments category exports down by 15%YoY, 13%YoY and 6.5%YoY respectively during same period.

Oil imports remained a big challenge

Further analysis of the import data shows that the POL group continues to be the leader in absolute terms as it contains 34% share in total imports during 11MFY12, imports under this head grew by 33%YoY to USD13.9bn from USD10.5bn. Similarly, Machinery group imports augmented by 6%YoY to USD5.1bn, while this group has shared 12% in total imports. Under the food group, Palm oil was the major imported commodity witnessed the increase of 16%YoY to USD2.1bn. In the Machinery group, telecom was the major component while the imports of this segment increased by 25%YoY to USD 1.2bn, whereas Mobile phone category swelled by 32%YoY to USD632mn. Under Agri & Chemical group, fertilizers was the key commodity which imports increased by 112%YoY to USD1.1bn during 11MFY12. In the metal group, Iron & steel's value expended by 12%YoY to USD1.2bn.

Outlook: FX Reserves depletion risk ahead

We expect the FY12 trade gap continue to be widen as the country is facing worst crises of energy including gas and electricity shortage which reduce the production of manufacturing sector. The rising trade gap is putting pressure on both forex reserves and the currency.

Trade deficit details: Energy crises the major reason