Trade deficit narrows

The latest statistics on foreign trade, released by the Pakistan Bureau of Statistics yesterday, suggest some amelioration on trade deficit in the three-month period ended September 30. The trade deficit reduced to 4.66 billion dollars in 1QFY13, which is nearly 10 percent lower than same period last year - kudos to a 28 percent year-on-year contraction in the monthly trade deficit recorded in September.
Pakistans exports totalled 6.18 billion dollars during the period under review, which shows a YoY growth of 4.26 percent. This, again, owes itself to stellar September, a month in which exports recorded a YoY growth of 21 percent in dollar terms and 31 percent in rupee terms.
The textile groups exports increased to 3.27 billion dollars during the period, which is nearly three percent more in dollar value and 12.2 percent more in rupee terms compared to 1QFY12. Future outlook for cotton exporters remains not-so-auspicious though. Demand is depressed due to lackluster recovery in developed economies, and a growing global cotton surplus may keep prices checked in the short term.
Within the textile group, cotton yarn exports sustained the momentum with its export shipments growing by nearly 40 percent in dollar value and roughly 60 percent in volume terms relative to same period last year. This surge is being attributed to growing demand from the Chinese buyers. The higher support price in China made their local yarn expensive as the international prices fell. This allowed the Pakistani yarn exports to be more price-competitive and hence paved the way for higher yarn shipments from Pakistan.
As for cotton cloth, the exports proceeds increased despite the volumetric decline. The value-added textiles segment presents a rather mixed picture. The knitwear exports registered a 1.65 percent drop in quantity, but the dollar proceeds came down by a higher, 10.27 percent. Similarly, bedwear exports declined in both volume and value terms. The exports of towels and the readymade garments segments, however, showed healthy gains on both counts.
Food group exports were recorded at 0.87 billion dollars, down nearly 12 percent in value terms over 1QFY12. Except for fish, sugar and meat exports, all food items showed quantitative decline which pulled down food exports value during the period. However, major decline has come from a nearly 27 percent slump in rice exports value with a corresponding quantitative decline of nearly 45 percent.
The Basmati rice variety showed YoY declines of 35 percent in volume and 40 percent in value. Other rice varieties also raked in comparatively lower receipts in 1QFY13. Global rice outlook is largely stable, on the heels of static demand and ample reserves. However, a slight output decline is expected, owing to weather-induced yield cuts in major rice-producing nations of Bangladesh, India and Pakistan.
Showing a 4.49 percent growth, the oil import bill exceeded four billion dollars in 1QFY13. In keeping with the past, petroleum groups imports were skewed more towards the finished products. Petroleum products import grew in terms of both volume & value, while the crude petroleum imports declined on both fronts. Lower refining output due to circular debt has seemingly fueled the demand for imported POL products.
The fertilizer imports kept on declining, and lodged in at 164.2 million dollars in 1QFY13. This comes on the back of a volumetric decline of nearly 57 percent and value drop of 52 percent over same period last year.
Pakistans trade balance is largely dependent on movements in prices of key commodities and production efficiency at home. With the oil futures expected to plunge, trade deficit will likely reduce further in the coming months.

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Selected commodities - Trade data: 1QFY13

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                   Total (mn $)Net % chg Y/Y   % chg in

Exports                                         qty Y/Y

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Total                   6,187         4.26            -

Rice                      309       (26.82)     (44.79)

Cotton Yarn               531        39.27        58.63

Cotton cloth              670         5.30       (8.22)

Knitwear                  555       (10.27)      (1.65)

Bed wear                  447       (14.61)     (10.84)

Towels                    189         4.78        13.07

Readymade garments        448        10.23         7.42

Imports

Total                  10,852        (2.37)           -

Petroleum products      2,714         8.15         8.84

Petroleum crude         1,289        (2.46)      (1.57)

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Source: PBS