12 October 2004	Tuesday	26 Shaban 1425

KARACHI, Oct 11: Pakistan's oil import bill has risen by about 38 per cent in the first quarter of this fiscal year over a year-ago period, but its share in total import bill remains unchanged at 22 per cent.

Data released by the Federal Bureau of Statistics show that Pakistan had to spend $943.5 billion on import of petroleum crude and its products during July-September 2004.

In the same period of last fiscal year it had spent $684.8 billion on import of these items. Thus, the country has seen its oil import bill rising by 37.8 per cent in the first quarter of this fiscal year, over a year-ago period. But as total imports of the country shot up to $4.308 billion in July-September 2004 from $3.112 billion in July-September 2003, the share of oil imports remains unchanged at around 22 per cent.

Oil import bill shot up in the first quarter of this fiscal year because of a big rise in international oil prices, not seen in the last two decades. As both spot and forward oil prices rose further this month, with the US Light Sweet Crude crossing $53 a barrel and the UK Brent Crude touching $50 a barrel, Pakistan's oil import bill is bound to increase also in the second quarter of this fiscal year.

At these levels, the prices of the US and the UK crude that serve as benchmark for all types of crude oil across the globe, represent up to 50-60 per cent increase over the end-June 2004 levels.

This certainly is going to take its toll on Pakistan's trade deficit, even though oil import bill as percentage of overall imports has remained unchanged at 22 per cent in the first quarter of this fiscal year. Pakistan has projected a $3 billion trade deficit for fiscal year 05 i.e. between July-June 2004-05. But oil industry experts say if oil prices continue to rise or even if they hold firm at this level for a few months to come, the trade deficit for FY05 may reach $4.2 billion.

Pakistan's trade deficit is widening rapidly not only because of a larger oil import bill but also because the country's growing economy has increased imports of food items, machinery, agricultural and other chemicals, metals and even miscellaneous items. Pakistan's economy is targeted to grow by 6.6 per cent in FY05, from an estimated 6.4 per cent in FY04.

In the first quarter of FY05, trade deficit shot up to $839 million from $144 million in the first quarter of FY04, as the country's imports of almost all items went up.

Food imports grew by 36.4 per cent to $310 million; machinery imports by 23 per cent to $922 million; import of agricultural and other chemical items by 40.6 per cent to $908 million and metal imports by 64 per cent to $235 million.

As is evident from the above, oil imports of $943.5 million claims the largest share in overall imports followed by machinery and agricultural and other chemical. This is a healthy indicator because larger imports of the items covered under the said three groups are widely used in production and a surge in their imports means economy is growing.

On the other hand, food import bill of $310 million in the first quarter of this fiscal year, up from $227 million in a year-ago period, points to increased consumption. As import of palm oil, which is used in cooking oil and ghee industries, claims the largest share of $178 million in food import bill of $310 million, this too is likely to have a favourable impact on production.

But what is disturbing is that the food import bill also includes $28 million spent on import of pulses and $14 million spent on wheat imports during the first quarter of this fiscal year.

Imports of both pulses and wheat continue and the latter may finally have a substantial share in overall food import bill. Wheat growers and millers say had the government managed wheat procurement and supply more prudently, the country would have to import much lesser quantity of this commodity then is being imported.

Pakistan has already contracted a little less than a million tons of wheat and it may need to import another half a million tons to avoid re-emergence of a wheat crisis in the near future.