Printer Friendly

Share of Imported Goods in Consumption of Pakistan.

Byline: Amjad Ali1

Pakistan is a small open economy. Whenever there is depreciation of domestic currency the prices of the imported goods rise. Also Pakistan not only imports for domestic consumption but a reasonable portion of the imports go to investment in industries in the form of imported capital equipment and machinery and also the imported intermediate goods which are value added and are exported. Pakistan bureau of Statistics classify the imports data into imports for capital goods consumer goods raw material for consumer goods and raw material for capital goods. The average share of imported goods in total imports for consumption purposes is 15.4 percent over the period 1970-2011.2 But this ratio only tells of the share of imports consumed directly; we need the share of imported goods in the consumption of Pakistan. The components of imports are very important in many aspects as depreciation/appreciation of the domestic currency

Leads toward the passing from imports to domestic goods prices and hence domestic inflation/deflation. Also it may lead towards the decreasing/increasing export competitiveness in terms of price as imported intermediate goods prices affect the production cost of exports in which these imports are used as inputs.

This study aims to estimate how much of imports are used for domestic consumption of Pakistan but to estimate this we have to find the share of imports that are used as intermediate goods for exports and that are invested in the economy we will only then be able to estimate the share of imported goods in total consumption as a residual.

For Pakistan Bader (2006) estimated that 37 percent of imports are value added and exported abroad. However we have re-estimated this ratio as a by-product of estimation of share of imported goods in consumption of Pakistan. According to this study 7.41 percent of the imports are value added and exported as a component of the exports.

Now I come to estimation of the share of imported goods in Pakistan. The number of total reporting manufacturing (industrial) establishments is 6417 for year 2005- 06. 3 Data from Pakistan Bureau of Statistics do not categorize imports in final consumption intermediate goods for exports and for investment purpose. The input- output tables constructed by Pakistan Bureau of Statistics are quite helpful in this regard but the 1990-91 input-output tables are the latest available. Pakistan's economy had experienced structural changes from 1990-91 onward. Thus our focus is to estimate the mentioned ratio for at least some recent year.

The latest Census of Manufacturing Industries (CMI) pertains to year 2005-06. It provides the share of directly imported raw material in total raw material as 22.19 percent. The census also documents the input-out ratio of 0.69 and the total value of industrial output for year 2005-06 at factor prices is Rs 2929 billion and at market prices is Rs 3030.19 billion. From value given at market prices we can get the contribution of inputs (capital) which turned out to be Rs 2121.13 billion4. As we know that 22.19 percent are imported inputs thus imported inputs' share in total industrial production turned out to be Rs 470.68 billion.

From the group-wise data of PBS we can calculate the ratio of manufactured items in total exports which is 84.1 percent. Our total exports for the year 2005-06 are Rs 984.84 billion and using the above ratio Rs 828.25 billion are manufactured exports for the same year. These manufactured exports are 27.33 percent of the total industrial output for year 2005-06.

Using a 0.69 input output ratio we get 571.49 billion as the share of capital inputs in manufactured exports and now of these 571.49 billion capital inputs 126.81 billion are imported inputs (taking 22.19 percent of the 571.49 billion imported capital inputs).

Pakistan's total imports for year 2005-06 are Rs 1711.16 billion and if we take the ratio of these 126.81 billon imported inputs to the total imports for year 2005-06 we get 7.41 percent. Thus 7.41 percent of the imports are value added and exported as component of the exports.

Now we need the portion of imports which are imported for investment purpose. For this purpose we have treated the ratio of machinery group to total imports excluding those imports which are categorized in the machinery group and are imported for consumption such as cell/Mobile phones. Thus according to this criterion the investment ratio in total imports is 18.37 percent.

Having found both these ratios we can now find the ratio of consumption goods in total imports as a residual which turned out to be 74.22 percent. Thus 74.22 percent of goods are imported for consumption purpose. Accordingly Rs 1313.98 billion of imports out of Rs 1770.39 billion 5 total imports are imported for consumption purposes and Rs 456.41 billion are imported for investment and inputs for manufacturing. The share of imported goods in total Consumption of Pakistan is 20.08 percent which is calculated as the ratio of imports for consumption purpose to that of total consumption for year 2005-06.6

References

Bader S. (2006) Determining Import Intensity of Exports for Pakistan SBP Research Bulletin Vol. 2 No. 2 pp. 363-381

Khan Mohsin S and Knight Malcolm D (1988) Imports Compression and Export Performance in Developing Countries" The Review of Economics and Statistics 70: 315-321

Pakistan Bureau of Statistics Islamabad Census of Large-Scale Manufacturing Industries (CMI) 2005-06

Pakistan Beurau of Statistics Islamabad Monthly Bulletin of Statistics 2008

State Bank of Pakistan Statistical bulletin various issues

Table 1: Imported Inputs as Percentage of Total Imports

###(Rs Billion)

S.No###Ratio

###2005-06

###1###Total imports###1711.16

###2###Total value of manufacturing production (at market prices)###3030.19

###3###Share of inputs (capital) in total industrial production###70%###2121.13

###Imported inputs share in total industrial production by inputs

###4###22.19%###470.68

Table 2: Ratio of Imported Inputs (Content of Exports) to Total Imports

S.No###Ratio###(Rs Billion)

###1###Total exports (2005-06)###984.84

###2###Manufactured share in total exports###84.10%###828.25

###3###Total Value of manufacturing production###3030.19

###4###Manufacturing exports ratio in total industrial production###27.33%

###5###Capital share in manufactured exports###69%###571.49

###6###Imported inputs share in manufactured exports (by Capital)###22.19%###126.81

###7###Total imports###1711.16

###8###Imported inputs part of imports that are value added and exported###7.41%

Table 3: Ratio of Consumption Investment and Value Added Imports (Imported Content of Exports) to

Total Imports

###2005-06

1 Investment ratio in imports###18.37%

2 Imported inputs part of imports that are value added and exported###7.41%

3 Consumption part of imports###74.22%

Table 4: Share of Imported Goods in Total Consumption

###(Rs Billion)

S.No###Ratio

###2005-06

###a###Nominal GDP at market prices###7623.21

###b###Total consumption###6544.53

###c###Total imports###1770.39

###d###Consumption part of the Imports###74.22%###1313.98

###e###Investment and exports part of imports###25.78%###456.41

###g###Share of imported goods in total consumption###20.08%
COPYRIGHT 2014 Asianet-Pakistan
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2014 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Publication:State Bank of Pakistan Research Bulletin
Geographic Code:9PAKI
Date:May 31, 2014
Words:1199
Previous Article:The Quest for Prosperity: How Developing Economies Can Take Off1.
Next Article:Tete-a-Tete with Arhtiyas.
Topics:

Terms of use | Privacy policy | Copyright © 2019 Farlex, Inc. | Feedback | For webmasters