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ISLAMABAD, June 5: Pakistan’s external balance of payments posted a significant improvement during the outgoing fiscal year 2002-03 despite subdued global economic activity, sluggish world trade and geopolitical uncertainty, says the Economic Survey issued here on Thursday.
Exports during July-April 2002-03 — the period covered by the pre-budget document of the Economic Adviser’s Wing in the Finance Division — grew by 20.8 per cent to $8849.7 million as against $7324.1 million of the same period last year, thereby achieving 85.5 per cent of export target for the current fiscal year.
This trend indicates that the current year’s export target of $10347m would be surpassed.
All the major categories registered substantial improvements, e.g.: Primary Commodities ($825.1 million) by 26.0pc; textile manufactures ($5644.8 million) by 21.1pc; other manufactures ($1667.4 million) by 10.4pc and others ($712.4 million) by 43.1pc.
A variety of reasons are cited by the Survey for healthy growth in exports, prominent among these being: substantial expansion in volume terms resulting from increased textile quota/ greater market access in the European Union, sharp reduction in the refinance rate under Export Finance Scheme and value-addition in textile manufactures.
Nevertheless, the document admits that Pakistan’s exports remained highly concentrated in a few items, namely, cotton, leather, rice, synthetic textiles and sports goods. These five categories accounted for about 75.6pc of total exports — almost the same as in the previous year.
Such a high degree of concentration of exports in a few items is a major source of instability in export earnings. A poor cotton crop seriously affects total export proceeds as it has been observed several times in the past, the Survey remarks.
Pakistan’s exports are concentrated in terms of their markets too. As noted by the Survey, slightly above one-half of these went to only seven countries, US, Germany, Japan, UK, Hong Kong, Dubai and Saudi Arabia.
IMPORTS: Likewise, the Survey states, imports during this period grew by 22.5pc, rising to $10099.5 million, from $8244.9 million in the comparable period of last year. The increase in imports was attributed to additional imports bills of machinery group ($594.7 million or 35.6pc), which is the sign of pick up in the domestic economic activity.
The food group ($813.0 million) accounting for only 8.1pc of total imports grew by 21pc, primarily on account of substantial increase in imports of palm oil and soybean oil.
Pakistan, according to the survey, had to spend $730.9 million more over last year on the import of major items during July- April 2002-03 due to higher import prices prevailing in the international market.
Had the unit values of these items remained at last year’s level, the import bill would have been $9368.6 million as against the actual - $10099.5 million and the import growth would have been 13.6pc instead of 22.5pc.
Pakistan’s imports, it remarks, are highly concentrated in a few items, namely, machinery, petroleum & petroleum products, chemicals, transport equipment, edible oil, iron & steel, fertiliser and tea. These accounted for 75.2pc of total import bill during 2001-02.
In terms of their composition too, Pakistan’s imports have not witnessed any appreciable change over the years. The share of raw material for consumer goods in total imports continued to be higher. On the other hand, the share of raw material for capital goods exhibited a declining trend - mainly due to slow-down of investment in the country.
Moreover, nearly one-half of Pakistan’s imports continue to originate from seven countries, namely, the US, Japan, Kuwait, Saudi Arabia, Germany, UK and Malaysia.
The share of Japan exhibited a declining trend because of shift in the import of machinery/capital goods from other sources, while the share of Pakistan’s imports from Kuwait and Saudi Arabia has been on the rise because of growing share of POL products in total imports.
The trade balance, however, deteriorated by $329 million due mainly to increase in the import price of petroleum products and crude, which increased by 21.2pc and 19.9pc, respectively, due to build-up in oil reserves, necessitated by the fear of Iraq war.
Excluding petroleum group’s increase, trade deficit posted an improvement of 14pc. Given the buoyant nature of domestic economic activity, higher than targeted increased in trade deficit is quite natural, according to the Survey.
TERMS OF TRADE: The terms of trade (ToT) with 1990-91 as base year remained flat at 90.8pc during 2001-02 as compared to 91.0pc of 2000-01. However, the ToT during July-March, 2002-03 has worsened by 12.1pc and stood at 80.7pc over the level of 91.8pc recorded in the same period of last year. This was the lowest level of the previous ten years.
The deterioration in ToT is attributed by the Survey to sharp increase in unit prices of petroleum crude and products in the international market.
The export unit value index during this period reflected a decline of 8.6pc while import unit value index showed a buoyancy of 3.9pc.
