KARACHI: Pakistan saved $4.5 billion due to a steep fall in oil prices in fiscal year 2015-16, giving extra support to the country which is faced with a decline in exports and poor foreign investment growth.

Pakistan depends 90 per cent on imported petroleum products for fuel consumption and needs large quantities of furnace oil for electricity generation.

Crude oil prices fell by more than 60pc – from $110 per barrel to $45 per barrel – in the international market during the last two years.

The government passed on the benefit of low prices to the market which vastly impacted the local economy. The country’s inflation fell to a record low in the last four decades.

However, the imports of both petroleum products and crude increased during the fiscal as consumption increased – possibly due to lower petroleum prices in the local market.

The State Bank of Pakistan reported on Friday that in FY16, the oil import bill fell to $7.667 billion compared to $12.166bn in FY15, a fall of $4.499bn or 37pc. The oil import bill in FY14 was $14.77bn.

The cost of oil fell by almost 50pc during the two years giving additional support to the country which increased its foreign exchange reserves through borrowings from donor agencies and international market.

Along with the extra support of low oil prices along with record remittances of $19.9bn in FY16, the country had to face a current account deficit of $2.5bn.

Moreover, falling exports widened the trade gap which consumed the benefit of low oil bill and record remittances.

The yearly official data shows that total exports fell to $22bn in FY16 from $24bn in FY15.

Exports remained less than the combined amount of remittances and savings from low oil bill which was about $24.4bn.

However, this additional support could control the damage to the economy as neither the debt servicing could be reduced nor the import bill could be curtailed.

The agriculture based country had to spend $4.6bn for the import of food and food related products during the said fiscal.

The largest bill of $1.6bn was paid for the import of palm oil which could be easily produced in the country.

Pakistan had to spend half a billion dollars for the import of pulses during FY16, indicating that the agriculture sector is not being managed properly.

Published in Dawn, July 24th, 2016