ISLAMABAD, Nov 30 (APP):The government needs to draw a broad-based policy thrust to focus on increase in exports rather than curtailing imports, said a report released by the Planning Ministry.
According to the report titled “First Quarterly Economic Review for FY22”, the structure of imports had been changed marginally during the current government in a bid to pursue the policy of increasing exports rather than curtailing imports.
The report added that four-fifth of imports are essentials and could not be avoided.
The share of food imports had increased from 9.7% in the year 2017-18 to 13.5% in FY2020-21, similarly share of other consumer goods also increased from 6.3% to 8.7% during the period under review.
The share of intermediate primary goods in imports remained same while that of intermediate manufacturing goods increased from 13.3% in Fy18 to 14.0% in FY21.
Share of Petroleum, Oil and Lubricants (POL) and other energy in the country’s total imports, however went down from 23.4% in FY 18 to 18.1% in FY21, while that of capital goods also went down from 8.8% to 6.3%.
Similarly share of textiles in the country’s imports rose to 10.4% in FY21 agaisnt the shrae of 8.3% in FY18, the report added.
Share of other machinery in the country’s imports also went down from 5.0% to 4.0% during the period under review.
The report added that Pakistan’s economy had a strong correlation between increase in economic activity and surge in imports.
The post-pandemic pickup in economic activity has once again fueled import demand and an imperative to preempt any BoP crisis in near-term.
In this regard, two major policy decisions are enhancing the cash margin for 500 plus items and market determined exchange rate policy.
Real Effective Exchange rate (REER) has historically shown ineffectiveness to curb imports in the past. Import substitution strategy has also failed in the past. Cash margin requirement was used in 2008 as well but was unable to make significant contribution to bridle imports.
Global commodity prices have very strong correlation with fluctuation in imports and main determining factor
besides domestic demand generated by economic activity.
The report also added a graph showing how the global commodity prices and imports growth have moved in
tandem between January 2000 to September 2021.
The reason why global commodity prices are correlated with imports growth is primarily because Pakistan’s
imports are relatively inelastic and bulk of import basket is comprised of essential items.
The structure of imports, food, consumer goods (mobiles and vehicles) and textile related imports has reached their highest ever share while energy imports is recorded at its lowest share in the past two decades, the report added.