Shrinking import cover to hurt various industries

Karachi, July 26, 2022: Delays in ‘non-essential’ imports are likely to negatively impact the Cement, Steel, Chemical, Textile, Auto and Auto Parts sectors as the government has decided to prioritize imports with preference given to oil and other essential imports over others.

Pakistan is short of dollars once again, with import cover treading between 6 to 7 weeks. A window of dollar inflows has emerged as Pakistan has reached the Staff Level agreement with IMF, however the window would unlock only with the approval by the IMF’s Executive Board, scheduled on August 24, expected to be followed by $8bn worth of external support from friendly countries.

This situation has reportedly led to prioritizing of imports with preference given to oil and other essential imports over others.

Gainers and losers

News reports regarding auto manufacturers shutting production over scarcity of forex to import raw materials have been making rounds.

The continuation of proportionating imports or delay among the ‘non-essential’ imports will likely lead to other sectors to follow similar announcements, creating production hiccups with late arrival of respective raw materials and/or machinery.

On the flip side, as some sectors also face competition from finished goods imports, any rationing of imports in those sectors would push arrival of goods of some competitors to later months, or at least till the situation normalizes.

“Sector-wise analysis suggests the ongoing situation may delay raw material imports for the Auto, Auto Parts, Textiles, Chemicals, Cement and Steel sectors from the listed space.

“On the other hand, sectors/companies such as Glass & Ceramic, Paper & Board and PAEL are likely to benefit from reduction in competition from imports, if any,” said Amreen Soorani at JS Research.

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