Looking at the latest import data, the decline in mobile phone imports is palpable. As per the shipment-based data from the Pakistan Bureau of Statistics (PBS), $160 million worth of handsets were imported in the Jul-Sep quarter of FY23, showing a year-on-year decline of 68 percent. The $335 million forex savings on this count during the first quarter has played their part in easing the import pressure. That amount accounted for 15 percent of the $2.3 billion overall reduction in Pakistan’s merchandise imports in this period relative to the last fiscal. No wonder its share in overall goods imports has reduced as well.
While it is the case that the declining PKR and the dwindling purchasing power have dented the appetite of folks to buy new phones or replace old ones, the major reason why such a large decline in mobile phone imports has come about owes itself to regulatory measures. Market sources indicate that the mobile phone importers (just as other machinery importers) had been asked by the monetary authority to restrain their monthly imports at half the value of their previous year’s monthly average imports.
The soon as such informal quotas are lifted, one can expect mobile phone imports to bounce back (albeit with a lag in PBS data, which is based on quantities imported rather than payments). If such restrictions remained in place (and there is a significant likelihood for that, as forex reserves continue to dwindle week after week), then considering that the country imported nearly $2 billion of mobile phones in FY22 (PBS data), the annual savings in forex might be in excess of $1.3 billion, at the current negative growth rate.
While any potential forex savings are welcome in the current circumstances, they won’t come about without leading to some negative impacts. Sales are already said to have slumped in prominent mobile-phone markets of big cities, leading to lower earnings and job losses in this sector’s supply chain. As folks drag their feet on buying new phones or replacing old ones due to escalators inflation, there is a knock-on effect on secondary markets for second-hand phones, especially in second and third-tier cities and towns.
There is also an impact on the local assembly of handsets, as the bulk of mobile phone imports in recent years have been CKD/SKD units that are later assembled in Pakistan. Recent data, including from telecom watchdog PTA, establish that locally-assembled mobile phones have come to dominate commercially-imported finished mobile phones. During the Jan-Aug period of CY22, PTA data show that locally-assembled phones totaled 15.6 million, as opposed to 1.2 million units of commercially-imported finished phones.
This assembly ecosystem has notched up impressive output numbers since 2019. A break in momentum may have consequences for investments, operational efficiencies, value addition, and export orientation. Reduced mobile phone imports may also affect digital adoption in the country, as the scale of the digital divide is still too large. Unfortunately, it is what it is. In times like these, one cannot fault the government for prioritizing forex preservation over other imperatives. Let’s see how things unfold in the months ahead.
Comments
Comments are closed.