LAHORE: A study conducted by the country’s leading advocacy forum has held global commodity cost escalation largely responsible for increase in total imports of $12.17 billion in the month of July and August, this year that is $5.17bn or 74.09 per cent more than the same period in 2020.
The global demand escalation and supply chain disruption caused by the container shortages is mainly responsible for escalation in costs, reveals the study.
“The commodity cost inflation is not controllable though paying for it poses a problem. Moreover, some of import increase is due to food and agricultural shortages. Imports for these are unavoidable for reasons of food security, checking domestic inflation and securing inputs for textile exports,” it explains, suggesting revival of agriculture output a sustainable solution.
The study was conducted by the experts of Pakistan Business Council - an advocacy group established in 2005 by the country’s 14 leading groups - with an objective to improve the general business environment of the country.
It recommends [Temporary Economic Refinance Facility] TERF-led higher machinery imports that, according to it, would pave the way for increase in exports. “Developing indigenous sources of energy is a longer-term substitute for imports,” it reads, declaring import of buses and trucks necessary to address needs of passengers and cargo transportation.
The study calls for avoiding knee-jerk and sweeping measures to discourage tariffs and LC margin calls that are raising cost of inputs and slowing down the economy, as the monthly quantum index of manufacturing is declining.
The study was carried out in the light of latest data issued by the Pakistan Bureau of Statistics (PBS) that reported high imports.
The study mentions machinery and transportation and petroleum, food, metals, textile, agriculture and chemicals and miscellaneous as having major share (54pc and 46pc respectively) of total increase in value of imports.
In pre-Covid situation (2019), the volume of petroleum product imports is the driver of increase in imports. Some of this is due to change in inventory levels. Petroleum crude imports have increased due to both, increase in volume and price.
During the Covid-situation, the study says increase in imports of petroleum products is due to rise in global prices, rather than an increase in volume. The petroleum crude imports have increased mainly due to a rise in global prices.
It said the increase in duties on Food Group (palm oil, pulses, soyabean oil and sugar), textile (raw cotton, synthetic fibre, synthetic and artificial silk yarn) and medicinal products would result in higher inflation.
“The government should review pricing policy for petroleum products to encourage conservation, avoid tariffs on machinery, cars and buses,” it recommends.
Published in Dawn, October 1st, 2021
