What’s causing the surge in mobile phone imports this fiscal? As per central bank data, those imposts tallied $234 million in the Jul-Oct period. This yearly growth of 29 percent is the highest in last five years for the four-month period. (Substantial yearly growth of 127 percent is also seen in 4MFY18 imports of ‘telecom apparatus’, which is a mix of telecom machinery, network devices and other ICT hardware).

At this pace, Pakistan will burn by FY18 end about $800 million on mobile phone imports, roughly $200 million more than FY17. That’s hardly a call for panic. Historically, too, mobile phones haven’t weighed too heavy on the import bill. Calculations based on central bank data show that mobile phone imports have averaged just 1.4 of Pakistan’s total imports between FY13 and FY17. Overall telecom imports – mobiles phones and telecom apparatus – have averaged 2.6 percent of Pakistan’s imports in this period.

Be that as it may, the double-digit growth of mobile phone imports thus far in FY18 – and not in prior years – poses a perplexing question: are Pakistan’s official statistics really capturing the actual scale of those imports?

Using SBP data, one finds that mobile phone imports have grown at a 4 percent CAGR between FY13 and FY17. This dataset defies what has taken place on the ground. Late in FY14, mobile broadband (MB) (3G & 4G services) were launched in Pakistan. From a base of zero in June 2014, MB subscribers reached 42 million by June 2017, PTA data show. (As of October 2017, MB subscribers had crossed 46 million).

Such an exponential growth in MB uptake wasn’t reflected in the mobile phone import data. It’s not like Pakistan has state-of-the-art factories that are churning out smartphones by the minute.

So, which phenomenon is feeding smartphone demand that is said to be growing in double digits? Industry sources maintain that about one million smartphones are being imported into Pakistan every month. Taking the average Smartphone invoice price at $200 – arguably a conservative estimate – would result in a $2.4 billion import bill per annum. Separate are imports of Smartphones’ cheaper cousins, the feature phones, which are said to have a similar import volume.

By that estimate, roughly $2 billion worth of mobile phone imports are not reflected in official figures. Pakistan hardly manufactures this hardware and the trading market is highly informal in nature. Industry leaders warn that smuggling – often in cahoots with customs officials – is the main culprit. In a recent interview with BR Research, Muhammad Kamran Khan, Country Head for HMD Pakistan & Afghanistan, said that smuggled phone devices were costing the government a tax loss of Rs35-40 billion per annum.

But if the smuggling racket is indeed so expansive and powerful, why is there a sudden rise in official mobile phone imports? It could be that PTA’s upcoming measures – where smuggled devices would stop working on local networks – are giving shady importers a pause, hence the growth in official imports. Let’s see if later months also witness import spike.

In any case, curbing such smuggling – through both technical and fiscal measures – is the bare minimum needed to get some local assembly going here.