Pakistan’s exports to Afghanistan have fallen by 30 percent YoY in the first half of the current fiscal year, as per SBP data. And this statistic has been used by various media sources to paint a doom and gloom scenario of Pakistan’s decreasing market in Afghanistan. That picture drawn is not entirely accurate. While the decline in Pakistan’s share in Afghanistan’s total imports over the years is worrisome, FY19’s numbers in themselves are not particularly alarming.
A look at the last decade’s exports from Pakistan to Afghanistan (for the first half of each fiscal year) shows that double digit declines year on year are not an anomaly. In recent years this is in part because Afghanistan’s overall imports declined from FY15 to FY17, as per Central Statistics Organisation, Afghanistan. When the country’s import rose in FY18, Pakistan’s exports to the country saw an up tick as well. Since FY19 figures for Afghanistan are not available, it is hard to say whether Pakistan has lost overall market share in the country or not.
Second and more important reason for the decline in exports is the nature of commodities that are exported. As the top exports of Pakistan are agri-based such as wheat, rice, and sugar, factors such as domestic support prices versus international prices, level of subsidy offered, and quality of harvest impact level of trade.
Such has been the case for the current fiscal year. SBP data from July to November indicates that Pakistan’s total exports dropped by $115 million YoY, led by sugar exports that saw a decline of $123 million. Increase in oil, fruit, vegetable, and rice exports mitigated the decrease of sugar exports.
Pakistan’s sugar exports have been dwindling away since September last calendar year as the export subsidy lapsed in July. Sugar has historically been one of the leading exports to Afghanistan which is a major market accounting for 51 percent of Pakistan’s exports in FY18. While media sources have not reported it as yet, Thal Industries first quarter FY19 report stated that Punjab government has announced an export subsidy of Rs5.35 per kg.
The quarterly report by the sugar producing company further indicated that a similar decision is also expected by KPK and Sindh.
Since the current year’s crop size is approximately 25 percent lower as compared to last year and yield per acre reported by the growers is also at a lower side, there is likely to be a reduction in overall sugar production in the country. So while the subsidy may prompt a resumption of exports to Afghanistan, there may not be enough sugar grown to be exported in the same amount as previous year.
Current deficit woes can ill afford a drop in exports. However, keeping in mind sugar’s water-intensive nature and the subsidy demanded for its exports, it is debatable whether current year’s exports drop to Afghanistan is perturbing or not.
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