The Economic Survey 2014-15 noted that Pakistani exports declined due to in-competitiveness of local exporters vis-à-vis regional countries, slow down in international trade, energy shortfalls and falling international prices of commodities. The Survey noted that the government developed an Action Plan to improve Pakistan's business environment in 2014, developed a virtual one stop shop to start a business and the Board of Investment is engaged in providing investor friendly environment to investors.
Economic Survey further states that the Free Trade Agreements (FTAs) signed with some of the countries appear to have been playing their role in this imbalance. By and large, the relative shares of imports from other countries have remained almost same over the years. However, share of imports from Malaysia witnessed a decline to only 2 percent which was 5-6 percent few years back. Whereas share of imports from Indonesia have increased gradually from 2 percent a few years back to around 5 percent during 2014-15 showing some change in Pakistan's imports patterns.
After initial gains in external sector during last financial year 2013-14, Pakistan balance of payments further improved considerably during July-April 2014-15. Current account narrowed by more than 50 percent against corresponding period last year. Country's foreign exchange reserves posted an increase of around US $3.6 billion during July-April 2014-15. Exchange rate remained stable while workers' remittances during this period posted remarkable growth of 16.1 percent. Due to a slump witnessed in international petroleum prices and some other commodities, country's import bill remained within the target. Despite sluggish performance of exports, trade deficit remained within limits and witnessed marginal increase. The monthly imports during July-April, 2014-15 were mostly flat with the exception for the months of August, September and October. Imports averaged $3,806 million per month during this period as against $3,758 million during July-June 2013-14. Thus, on average, imports have risen only by $48.0 million per month during the period.
Like exports, Pakistan's imports are also highly concentrated in few countries. Based on current year data, around 50 percent of Pakistan imports originate from just few countries like China, Kuwait, Saudi Arabia, the UAE, India and Indonesia. It is worth mentioning to note that during current fiscal year, the share of imports from China has sharply increased from 17 percent in last fiscal year to 23 percent during July-March 2014-15. The imbalance of trade in favour of China is highly alarming.
Pakistan like other developing countries benefited by a sharp decline in global oil prices during current financial year as far as their import bill is concerned. Almost one third of Pakistan import bill constitutes petroleum products including crude oil. Between July, 2014 and April, 2015, international crude oil price dropped by around 44 percent from $107 per barrel to US $60 per barrel in April, 2015. International prices of some of the important commodities also fell for instance palm oil and tea prices are declining. This trend of international prices impacted on the import bill of Pakistan during July-April, 2014-15 considerably. The imports target for current financial year was set at US $44.2 billion. Pakistan imports were up by only 1.8 percent in the first ten months of the current fiscal year compared to corresponding period last year, rising from US $37,084.81 million during 2013-14(July-April) to 37,763.08 million during first ten months of current financial year, showing an increase of US $678.27 million in absolute term
The curtailment of import bill mainly comes from Petroleum group which as a whole declined by $2,366.1 million (19.4 percent). Import of Petroleum crude declined by 24.3 percent ( $1,150.9 million) during July-April 201415 compared to corresponding period last year.
While import of petroleum products declined by 16.2 percent ($1,215.2 million) it is expected that by the end of the current financial year, in absolute terms, the import bill of petroleum group would remain $3.0 billion due to a decline in petroleum prices. Despite a considerable decrease in prices of petroleum products including crude oil and closure of CNG sector during current year, the imported quantity of petroleum products did not increase. In fact import of petroleum crude declined by 6.3 percent in quantity as compared to corresponding period last year.
The major chunk of saving of $2,366.1 million was realised from import of petroleum and it was offset by increase in import bill of the machinery group ($880.9 million), Food group ( $751.4 million), Transport Group (US $275.7 million) followed by Agriculture and Chemicals ($587.4 million ) and Textile group ($558.3 million), etc. However, the worrisome indicator is that there is a dip in imports of textile related machinery, suggesting that the sector is not expanding. As against $493.4 million textile machinery import in July-April 2013-14 period of the previous fiscal year, the imports amounted to $367.8 million, showing 25.8 percent decline in dollar terms. Similarly Textile Group imports, which mostly consist of raw material items, also witnessed a declining trend by 7.1 percent during July-April 2014-15.