Imports (reported by PBS) are down by 37 percent from the previous month to$4.99 billion in July. The detailed numbers are out. The prime decline isin the petroleum imports -down 60 percent to $1.4 billion. Barringpetroleum, the fall is mere 16 percent from $4.2 billion to $3.6 billion.And majority of the non-oil decline is due to imposition of informal bansin the form of allowing selected L/Cs to open and retire.
Within oil, the decline is due to building of inventories at peak prices.Imports will pick up in August. Thus, it’s hard to say about the demanddriven factors (due to higher interest rates, PKR depreciation, passing onthe energy prices and imposition of higher taxes) in the decline of both inpetroleum and all other imports. Petroleum numbers will become clearer byAugust while in case of other imports the demand situation would getclearer once the L/Cs approvals won’t be requiring SBP’s nod.
In July, food imports almost remained at its levels. Stood at $763 million– up by 35 percent MoM. However, the toll is in line with the lasttwelve-month average of $761 million. The biggest share is of palm oil-$299 million. Here the prices are coming down in the international market,but is not reflecting in the import bill. Perhaps, the case of buildinginventory at peak prices is true for palm oil imports as well. In months tocome, the palm oil imports should come down to ease the food import bill.
The machinery imports stood at $628 million in July. Although it’s slightlyup from the last month, but it is on a decline – down by 31 percent fromthe average monthly imports of last twelve months. The prime reason for thefall is administrative measures in opening of L/Cs. The mobile phone (bothCKD and CBU) were the first one to come under control from the last month.In June, imports were $32 million and the toll is $39 million in July. Theaverage monthly number in the previous 12 months was $182 million. There isa straight reduction of around $150 million per month in this one itemalone.
The other area where the decline of administrative measures is evident isautomobiles – imports down by 45 percent to $209 million in July. Here theadministrative measures started to be implemented in July. CKD cars importsare down to half to $68 million in July. That is the new norm (till it ischanged). SBP is giving 50 percent quota of imports to automobilemanufacturers. The fall in CBU cars is 60 percent. And this will remainlike this for some time, as higher duties are now being imposed.
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The real benefit comes from petroleum imports. On a monthly basis, the fallis by massive 60 percent. And the fall is 28 percent from the previous 12months average. The lower import in July is primarily contributing tohigher imports in June which is almost double of the last twelve-monthaverage. The month could not be worse. Not only imports were at all hightime high in terms of volumes (for petrol and LNG); but the prices werealso at 13-years high.
Enough has been said on the issue in this space. Just to emphasize thepoint that higher volumes were being imported at peaking prices, here aresome numbers to support. The Brent price averaged at $120/barrel in July ascompared to the previous twelve-month average of $87/barrel, and in Julyit’s down to $109/barrel. Currently, the price is hovering in 90s. And thetop volumes were imported in June – 3.2 million tons of oil versus averagemonthly imports of 2.0 million tons in the previous twelve months. The tollis reduced to 1.3 million ton in July. This clearly shows that over 1million tons excess import was done in June.
The decline in other groups of imports, the fall is ranging from 24 percentto 30 percent. There are three factors coming into play. One is that pricesare moving down from the peak. Other is informal control on L/Cs by SBP,and the third is curtailment of demand. The risks of demand surging back uponce SBP lifts restrictions continue to lurk. Let’s see how the situationunfolds in months to come.
